N-30D 1 form.htm Marshall Funds, Inc. N-30D

[Logo of Marshall Funds]

The Marshall Funds Family

Annual Report

The Institutional Class of Shares
(Class I)

  • Marshall International Stock Fund

AUGUST 31, 2002

Table of Contents

Commentary      1
Financial Information    
Portfolio of Investments   3
Statement of Assets and Liabilities   8
Statement of Operations   9
Statement of Changes in Net Assets   10
Financial Highlights   11
Notes to Financial Statements   12
Directors & Officers   18

[Photo of Daniel R. Jaworski]

Daniel R. Jaworski, CFA

Marshall International Stock Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (13.00)%.** In comparison, the Lipper International Funds Index (LIFI) returned (12.50)%, while the Morgan Stanley Capital International Europe, Australasia and Far East Index (EAFE) returned (14.95)%.***

Factors Affecting Performance

International markets fared no better than the U.S. stock market, as economic growth remained sluggish throughout Europe and Japan. The decline in equities was broad on both a geographic and industrial basis. Of the 21 developed countries included in the Fund's benchmark, the EAFE, only two generated positive equity market returns over the last 12 months. Also, all 10 of the major industrial sectors generated negative returns for the reporting period. While emerging markets in Asia showed signs of life during part of the reporting period, most of those gains evaporated as the fiscal year came to a close. However, U.S. investors in overseas markets benefited from a weakened dollar, as foreign currencies translated into more dollars by the end of the reporting period.

Compared to the EAFE, the Fund benefited from better stock selection in the technology and telecommunications sectors, avoiding some of the worst performing companies in the index. Indeed, one of the Fund's best performers was Telecom Italia SpA (1.24% of net assets), which has relatively low debt and strong earnings. In addition, the Fund owned shares of Samsung Electronics Co. (1.96% of net assets), a stock that nearly doubled during the year on the strength of strong earnings momentum. Since Samsung Electronics Co. is based in South Korea and thus is part of emerging markets, it is not included in the EAFE. As of August 31, 2002, emerging market companies accounted for about 13% of the Fund's holdings.†

Another relatively good area for the Fund was the consumer sector, with such winning stocks as Hyundai Motor Co., Ltd. (0.89% of net assets) generating a strong contribution to total return. A low interest rate environment certainly benefited Hyundai Motor Co., Ltd., as well as its increasing market share and reputation for quality automobiles at reasonable prices. In financial services, Bank of Ireland (1.99% of net assets) continues to generate excellent returns, boosted by a relatively healthy Irish economy and a scarcity of competitors.

Looking Ahead

We continue to search for companies that are likely to benefit from an economic pickup, including banks and highly focused industrial companies. While we have not invested heavily in pharmaceuticals due to concerns about competition from generic drugs and delayed FDA approvals, these stocks have declined in price to the point where they appear attractive. In technology, we are still concerned about overcapacity and weak demand.

In terms of geographical allocation, we remain cautious on Japan, focusing our exposure in a few companies such as Nissan Motors Co., Ltd. (2.57% of net assets) and Sega Enterprises (2.26% of net assets) that have demonstrated a concern for shareholder value. In Europe, while economic growth remains slower than expected, we are increasing our holdings in industrial sectors where there has been consolidation, buying stocks with strong returns on capital and modest price/earnings multiples. Meanwhile, emerging markets continue to provide the best opportunity for economic growth, especially with companies that meet our investment criteria of reasonably priced, worldwide industry leaders.

 

August 31, 2002

Portfolio of Investments

International Stock Fund

   

Description

    

  

Shares

    

Value

Common Stocks -- 100.6%

 

 

 

 

 

 

Australia -- 1.4%

 

 

 

 

 

 

Banks -- 1.1%

 

 

 

 

 

 

 

(1)National Australia Bank Ltd., Melbourne

 

 

169,600

 

$

3,230,094

 

Transportation -- 0.3%

 

 

 

 

 

 

 

Qantas Airways Ltd.

 

 

483,900

 

 

1,111,778

 

Total Australia

 

 

 

 

 

4,341,872

Belgium -- 1.5%

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

Dexia

 

 

349,300

 

 

4,617,923

Bermuda -- 0.5%

 

 

 

 

 

 

IT Consulting &
Services --0.5%

 

 

 

 

 

 

 

(2)Accenture Ltd.

 

 

99,300

 

 

1,633,485

Brazil -- 1.2%

 

 

 

 

 

 

Metals & Mining -- 1.2%

 

 

 

 

 

 

 

Companhia Vale Do Rio Doce, ADR

 

 

159,850

 

 

3,744,713

Canada -- 1.7%

 

 

 

 

 

 

Banks -- 1.3%

 

 

 

 

 

 

 

Royal Bank of Canada, Montreal

 

 

105,200

 

 

3,780,287

 

Financial Services -- 0.4%

 

 

 

 

 

 

 

Manulife Financial Corp.

 

 

55,500

 

 

1,291,700

 

Total Canada

 

 

 

 

 

5,071,987

Finland -- 1.9%

 

 

 

 

 

 

 

IT Consulting &
Services -- 0.2%

 

 

 

 

 

 

 

TietoEnator OYJ

 

 

36,800

 

 

566,638

 

Paper & Forest
Products -- 0.5%

 

 

 

 

 

 

 

Stora Enso OYJ, Class R

 

 

139,100

 

 

1,536,115

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Nokia OYJ

 

 

51,500

 

 

687,927

 

Nokia OYJ, Class A, ADR

 

 

233,000

 

 

3,096,570

 

 

 

 

 

 

 

3,784,497

 

Total Finland

 

 

 

 

 

5,887,250

France -- 10.5%

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

BNP Paribas SA

 

 

96,600

 

 

4,505,855

 

Construction
Equipment -- 1.9%

 

 

 

 

 

 

 

(1)Technip

 

 

42,300

 

 

3,235,886

 

(1)Vinci SA

 

 

40,000

 

 

2,434,221

 

 

 

 

 

 

 

5,670,107

 

Domestic & International Oil -- 1.8%

 

 

 

 

 

 

 

(1)Total Fina SA, Class B

 

 

38,300

 

$

5,461,619

 

Healthcare -- 1.0%

 

 

 

 

 

 

 

(1)Aventis SA

 

 

50,300

 

 

2,962,370

 

Industrial Gases -- 0.8%

 

 

 

 

 

 

 

L'Air Liquide SA

 

 

18,262

 

 

2,530,747

 

Media -- 0.9%

 

 

 

 

 

 

 

(1)Thomson Multimedia

 

 

131,872

 

 

2,619,002

 

Metals & Mining -- 0.4%

 

 

 

 

 

 

 

(1)Pechiney SA, Class A

 

 

36,200

 

 

1,325,687

 

Water Treatment -- 2.2%

 

 

 

 

 

 

 

(1)(2)Vivendi Environment

 

 

266,350

 

 

6,572,364

 

(1)(2)Vivendi Environment, Warrants

 

 

48,300

 

 

6,158

 

 

 

 

 

 

 

6,578,522

 

Total France

 

 

 

 

 

31,653,909

Germany -- 5.1%

 

 

 

 

 

 

Automotive -- 1.2%

 

 

 

 

 

 

 

Bayerische Motoren Werke AG

 

 

92,200

 

 

3,484,985

 

Drugs -- 0.9%

 

 

 

 

 

 

 

Schering AG

 

 

49,100

 

 

2,716,413

 

Healthcare -- 0.4%

 

 

 

 

 

 

 

(1)Fresenius Medical Care AG

 

 

40,562

 

 

1,157,632

 

Household Product/
Wares -- 1.1%

 

 

 

 

 

 

 

Adidas-Salomon AG

 

 

46,400

 

 

3,310,619

 

Insurance -- 1.5%

 

 

 

 

 

 

 

(1)Allianz AG

 

 

10,730

 

 

1,378,466

 

Muenchener
Rueckversicherungs-
Gesellschaft AG

 

 

17,720

 

 

3,227,086

 

 

 

 

 

 

 

4,605,552

 

Total Germany

 

 

 

 

 

15,275,201

Hong Kong -- 1.5%

 

 

 

 

 

 

Telecommunications -- 0.9%

 

 

 

 

 

 

 

(2)China Mobile (Hong Kong) Ltd.

 

 

936,900

 

 

2,594,526

 

Transportation -- 0.6%

 

 

 

 

 

 

 

Cathay Pacific Airways Ltd.

 

 

1,270,100

 

 

1,970,309

 

Total Hong Kong

 

 

 

 

 

4,564,835

Ireland -- 3.0%

 

 

 

 

 

 

Banks -- 2.0%

 

 

 

 

 

 

 

Bank of Ireland

 

 

517,400

 

 

6,018,238

 

Construction
Materials -- 1.0%

 

 

 

 

 

 

 

CRH PLC

 

 

210,100

 

$

3,018,714

 

Total Ireland

 

 

 

 

 

9,036,952

Italy -- 4.9%

 

 

 

 

 

 

Insurance -- 0.8%

 

 

 

 

 

 

 

Riunione Adriatica di Sicurta SpA

 

 

205,100

 

 

2,353,476

 

Media -- 1.1%

 

 

 

 

 

 

 

(1)Mediaset SpA

 

 

474,400

 

 

3,270,832

 

Oil & Gas Products -- 1.8%

 

 

 

 

 

 

 

(1)ENI SpA

 

 

360,100

 

 

5,452,914

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Telecom Italia SpA

 

 

698,300

 

 

3,739,323

 

Total Italy

 

 

 

 

 

14,816,545

Japan -- 12.4%

 

 

 

 

 

 

 

Air Freight & Couriers -- 0.9%

 

 

 

 

 

 

 

(1)Yamato Transport

 

 

157,900

 

 

2,679,652

 

Automotive -- 3.2%

 

 

 

 

 

 

 

(1)Honda Motor Co., Ltd.

 

 

47,100

 

 

1,991,342

 

Nissan Motor Co., Ltd.

 

 

1,062,200

 

 

7,747,212

 

 

 

 

 

 

 

9,738,554

 

Chemical -- 0.6%

 

 

 

 

 

 

 

Takeda Chemical Industries, Ltd.

 

 

43,900

 

 

1,852,352

 

Financial Services -- 0.5%

 

 

 

 

 

 

 

Nomura Securities Co., Ltd.

 

 

108,700

 

 

1,430,902

 

Insurance -- 0.7%

 

 

 

 

 

 

 

(2)Millea Holdings, Inc.

 

 

272

 

 

2,203,765

 

Leisure & Recreation -- 2.3%

 

 

 

 

 

 

(1)(2)Sega Enterprises

 

 

285,200

 

 

6,833,655

 

Office Equipment -- 1.0%

 

 

 

 

 

 

 

(1)Ricoh Co., Ltd.

 

 

168,800

 

 

3,013,905

 

Retail -- 1.7%

 

 

 

 

 

 

 

Ito-Yokado Co., Ltd.

 

 

121,900

 

 

5,184,613

 

Telecommunications -- 1.5%

 

 

 

 

 

 

 

Nippon Television Network Corp.

 

 

318

 

 

1,623,009

 

NTT DoCoMo, Inc.

 

 

1,420

 

 

3,013,770

 

 

 

 

 

 

 

4,636,779

 

Total Japan

 

 

 

 

 

37,574,177

Korea, Republic of -- 5.4%

 

 

 

 

 

 

 

Automotive -- 0.9%

 

 

 

 

 

 

 

Hyundai Motor Co., Ltd.

 

 

94,760

 

 

2,691,821

 

Banks -- 1.3%

 

 

 

 

 

 

 

Kookmin Bank

 

 

75,663

 

$

3,552,728

 

(2)Kookmin Bank, ADR

 

 

9,174

 

 

429,343

 

 

 

 

 

 

 

3,982,071

 

Electronics -- 2.0%

 

 

 

 

 

 

 

Samsung Electronics Co.

 

 

21,360

 

 

5,907,060

 

Metals & Mining -- 0.2%

 

 

 

 

 

 

 

Pohang Iron and Steel Co. Ltd., ADR

 

 

25,200

 

 

575,820

 

Telecommunications -- 1.0%

 

 

 

 

 

 

 

SK Telecom Co., Ltd., ADR

 

 

76,400

 

 

1,662,464

 

(2)KT Corp., ADR

 

 

60,300

 

 

1,369,413

 

 

 

 

 

 

 

3,031,877

 

Total Korea, Republic of

 

 

 

 

 

16,188,649

Mexico -- 5.0%

 

 

 

 

 

 

 

Beverages & Foods -- 1.5%

 

 

 

 

 

 

 

(2)Fomento Economico Mexicano, SA de CV, ADR

 

 

45,600

 

 

1,717,752

 

Grupo Modelo, SA de CV, Class C

 

 

1,153,100

 

 

2,895,834

 

 

 

 

 

 

 

4,613,586

 

Broadcasting & Cable TV -- 1.0%

 

 

 

 

 

 

 

(2)Grupo Televisa SA, GDR

 

 

95,800

 

 

3,040,692

 

Financial Services -- 1.1%

 

 

 

 

 

 

 

Grupo Financiero BBVA Bancomer, SA de CV

 

 

4,198,400

 

 

3,328,232

 

Retail -- 0.3%

 

 

 

 

 

 

 

Wal-Mart de Mexico SA de CV

 

 

278,900

 

 

754,985

 

Telecommunications -- 1.1%

 

 

 

 

 

 

 

Telefonos de Mexico, SA de CV, Class L, ADR

 

 

110,400

 

 

3,271,152

 

Total Mexico

 

 

 

 

 

15,008,647

Netherlands -- 6.3%

 

 

 

 

 

 

 

Chemicals -- 1.1%

 

 

 

 

 

 

 

Akzo Nobel NV

 

 

88,900

 

 

3,314,913

 

Domestic & International Oil -- 1.0%

 

 

 

 

 

 

 

(1)Royal Dutch Petroleum Co.

 

 

68,700

 

 

3,099,366

 

Financial Services -- 1.8%

 

 

 

 

 

 

 

(1)ING Group NV

 

 

199,900

 

 

4,364,115

 

(1)Van der Moolen Holding NV

 

 

39,900

 

 

864,815

 

 

 

 

 

 

 

5,228,930

 

Transportation -- 2.4%

 

 

 

 

 

 

 

TPG NV

 

 

369,900

 

 

7,295,493

 

Total Netherlands

 

 

 

 

 

18,938,702

Russia -- 1.3%

 

 

 

 

 

 

 

Domestic & International Oil -- 1.3%

 

 

 

 

 

 

 

YUKOS, ADR

 

 

30,500

 

$

3,965,930

Singapore -- 0.3%

 

 

 

 

 

 

Technologies -- 0.3%

 

 

 

 

 

 

 

Singapore Technologies Engineering Ltd.

 

 

794,400

 

 

789,928

South Africa -- 0.7%

 

 

 

 

 

 

 

Paper & Forest
Products -- 0.7%

 

 

 

 

 

 

 

Sappi Ltd.

 

 

178,400

 

 

2,150,520

Sweden -- 4.3%

 

 

 

 

 

 

 

Commercials
Services -- 0.7%

 

 

 

 

 

 

 

(2)Alfa Laval AB

 

 

214,700

 

 

1,942,015

 

Household Product/
Wares -- 1.0%

 

 

 

 

 

 

 

(1)Electrolux AB, Class B

 

 

181,800

 

 

3,124,409

 

Industrial Services -- 2.1%

 

 

 

 

 

 

 

Sandvik AB

 

 

136,600

 

 

3,168,901

 

Atlas Copco AB, Class A

 

 

156,710

 

 

3,235,191

 

 

 

 

 

 

 

6,404,092

 

Paper & Forest
Products -- 0.5%

 

 

 

 

 

 

 

Svenska Cellulosa AB, Class B

 

 

43,290

 

 

1,476,445

 

Total Sweden

 

 

 

 

 

12,946,961

Switzerland -- 7.2%

 

 

 

 

 

 

 

Banks -- 1.8%

 

 

 

 

 

 

 

(1)UBS AG

 

 

115,390

 

 

5,436,541

 

Beverages & Foods -- 2.1%

 

 

 

 

 

 

 

(1)Nestle SA

 

 

28,770

 

 

6,173,491

 

Construction
Materials -- 1.0%

 

 

 

 

 

 

 

(1)Holcim Ltd.

 

 

16,170

 

 

3,006,417

 

Insurance -- 0.9%

 

 

 

 

 

 

 

(1)Swiss Re

 

 

37,540

 

 

2,651,766

 

Pharmaceuticals &
Healthcare -- 1.4%

 

 

 

 

 

 

 

(1)Novartis AG

 

 

107,030

 

 

4,343,681

 

Total Switzerland

 

 

 

 

 

21,611,896

Taiwan -- 0.5%

 

 

 

 

 

 

 

Electrical Equipment -- 0.5%

 

 

 

 

 

 

 

(2)Taiwan Semiconductor Manufacturing Co., ADR

 

 

198,800

 

 

1,624,196

United Kingdom -- 24.0%

 

 

 

 

 

 

 

Aerospace &
Defense -- 1.2%

 

 

 

 

 

 

 

BAE Systems PLC

 

 

762,100

 

$

3,609,512

 

Banks -- 2.8%

 

 

 

 

 

 

 

Royal Bank of Scotland PLC, Edinburgh

 

 

225,500

 

 

5,385,519

 

Standard Chartered PLC

 

 

275,200

 

 

3,152,065

 

 

 

 

 

 

 

8,537,584

 

Beverages & Foods -- 1.8%

 

 

 

 

 

 

 

Diageo PLC

 

 

435,700

 

 

5,273,626

 

Containers & Metal/
Glass -- 1.0%

 

 

 

 

 

 

 

Rexam PLC

 

 

427,500

 

 

2,951,114

 

Domestic & International Oil -- 1.1%

 

 

 

 

 

 

 

BP Amoco PLC

 

 

443,400

 

 

3,434,906

 

Gas Distribution -- 0.5%

 

 

 

 

 

 

 

BG Group PLC

 

 

336,900

 

 

1,405,319

 

Healthcare Equipment & Supplies -- 0.9%

 

 

 

 

 

 

 

Smith & Nephew PLC

 

 

492,800

 

 

2,841,267

 

Hotels & Motels -- 0.9%

 

 

 

 

 

 

 

Six Continents PLC

 

 

275,800

 

 

2,591,182

 

Leisure &
Recreation -- 1.4%

 

 

 

 

 

 

 

Hilton Group PLC

 

 

596,900

 

 

1,764,615

 

(2)P&O Princess Cruises PLC

 

 

364,300

 

 

2,368,228

 

 

 

 

 

 

 

4,132,843

 

Manufacturing -- 0.5%

 

 

 

 

 

 

 

Smiths Group PLC

 

 

130,700

 

 

1,476,772

 

Media -- 0.5%

 

 

 

 

 

 

 

WPP Group PLC

 

 

203,900

 

 

1,502,240

 

Metals & Mining -- 0.7%

 

 

 

 

 

 

 

Rio Tinto PLC

 

 

111,800

 

 

1,962,320

 

MultiMedia -- 1.6%

 

 

 

 

 

 

 

Pearson PLC

 

 

260,200

 

 

2,585,576

 

Reed International PLC

 

 

260,800

 

 

2,329,155

 

 

 

 

 

 

 

4,914,731

 

Pharmaceuticals &
Healthcare -- 2.2%

 

 

 

 

 

 

 

(2)GlaxoSmithKline PLC

 

 

359,744

 

 

6,770,834

    

Description

    

Shares or
Principal
Amount

    

Value

 

Retail -- 4.4%

 

 

 

 

 

 

 

Kingfisher PLC

 

 

2,976,018

 

$

9,799,867

 

Next PLC

 

 

258,900

 

 

3,378,117

 

 

 

 

 

 

 

13,177,984

 

Telecommunications -- 1.6%

 

 

 

 

 

 

 

Vodafone Group PLC

 

 

2,953,721

 

 

4,731,784

 

Tobacco -- 0.9%

 

 

 

 

 

 

 

British American Tobacco PLC

 

 

242,600

 

 

2,819,978

 

Total United Kingdom

 

 

 

 

 

72,133,996

Total Common Stocks (identified cost $314,559,418)

 

 

 

 

 

303,578,274

(3)Repurchase Agreement -- 0.5%

 

 

 

 

 

 

 

State Street Corp., 0.85%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

1,548,000

 

 

1,548,000

(4)Total Investments (identified cost $316,107,418)

 

 

 

 

$

305,126,274

Notes to Portfolio of Investments

(1) Certain shares or principal amounts are temporarily on loan to unaffiliated broker-dealers.

(2) Non-income producing security.

(3) The repurchase agreement is fully collateralized by U.S. government and/or agency obligations based on current market prices.

(4) The cost of investments for federal tax purposes amounts to $318,122,116. The net unrealized depreciation of investments on a federal tax basis amounts to $12,995,842 which is comprised of $22,843,714 appreciation and $35,839,556 depreciation at August 31, 2002.

Note: The categories of investments are shown as a percentage of net assets ($301,911,626) at August 31, 2002.

The following acronyms are used throughout this report:

ADR -- American Depositary Receipt

GDR -- Global Depository Receipt

August 31, 2002

Statement of Assets and Liabilities

 

     

 

  

Assets:

  

 

Investments in securities, at value

  

$ 305,126,274

  

Short-term investments held as collateral for securities lending

  

57,174,918

  

Cash

  

936

  

Cash denominated in foreign currencies (identified cost, $906,952)

  

906,972

  

Income receivable

  

711,874

  

Receivable for investments sold

  

13,500,111

  

Receivable for capital stock sold

  

1,096,209

  
   
 

Total assets

  

378,517,294

  
   
 

Liabilities:

  

 

Payable for capital stock redeemed

  

11,171,498

  

Payable for investments purchased

  

7,865,230

  

Payable on collateral due to broker

  

57,174,918

  

Net payable for foreign currency exchange contracts

  

10,307

  

Accrued expenses

  

383,715

  
   
 

Total liabilities

  

76,605,668

  
   
 

Total Net Assets

  

$ 301,911,626

  
   
 

Net Assets Consist of:

  

 

Paid-in-capital

  

417,966,476

  

Net unrealized depreciation on investments

  

 

and foreign currency translation

  

(10,948,859

 )

Accumulated net realized loss on investments

  

 

and foreign currency transactions

  

(104,313,600

 )

Accumulated net operating loss

  

(792,391

 )
   
 

Total Net Assets

  

$ 301,911,626

  
   
 

Net Asset Value, Offering Price and Redemption Proceeds Per Share

  

 

Investor Class of Shares:

  

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

$ 9.31

  

Advisor Class of Shares:

  

 

Net Asset Value and Redemption proceeds Per Share

  

$ 9.30

  

Offering Price Per Share

  

$ 9.87

 *

Institutional Class of Shares:

  

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

$ 9.37

  

Net Assets:

  

 

Investor Class of Shares

  

$ 195,496,018

  

Advisor Class of Shares

  

4,182,731

  

Institutional Class of Shares

  

102,232,877

  
   
 

Total Net Assets

  

$ 301,911,626

  
   
 

Shares Outstanding:

  

 

Investor Class of Shares

  

20,997,631

  

Advisor Class of Shares

  

449,573

  

Institutional Class of Shares

  

10,909,047

  
   
 

Total shares outstanding

  

32,356,251

  
   
 

Investments, at identified cost

  

$ 316,107,418

  
   
 

* Computation of offering price per share 100/94.25 of net asset value.

Year Ended August 31, 2002

Statement of Operations

 

     

 

     

Investment Income:

  

 

Interest income

  

$ 268,959

  

Dividend income

  

5,767,426

 (1)
   
 

Total income

  

6,036,385

  

Expenses:

  

 

Investment adviser fee

  

3,323,055

  

Shareholder services fees--

  

 

Investor Class of Shares

  

559,875

  

Advisor Class of Shares

  

9,871

  

Administrative fees

  

328,190

  

Portfolio accounting fees

  

122,295

  

Transfer and dividend disbursing agent fees

  

104,370

  

Custodian fees

  

201,176

  

Registration fees

  

37,940

  

Auditing fees

  

16,526

  

Legal fees

  

2,214

  

Printing and postage

  

37,676

  

Directors' fees

  

7,273

  

Insurance premiums

  

2,122

  

Distribution services fees--

  

 

Advisor Class of Shares

  

9,871

  

Miscellaneous

  

8,036

  
   
 

Total expenses

  

4,770,490

  

Deduct--

  

 

Waiver of investment adviser fee

  

(70,000

 )

Waiver of shareholder services fees--

  

 

Advisor Class of Shares

  

(9,871

 )
   
 

Total Waivers

  

(79,871

 )
   
 

Net expenses

  

4,690,619

  
   
 

Net investment income

 

1,345,766

  

Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:

  

 

Net realized loss on investment transactions (identified cost basis)

  

(59,392,247

 )

Net realized loss on foreign currency (identified cost basis)

  

(882,998

 )

Net change in unrealized depreciation on investments and foreign currency translation

  

12,302,179

  
   
 

Net realized and unrealized loss on investments and foreign currency

  

(47,973,066

 )
   
 

Change in net assets resulting from operations

  

$ (46,627,300

 )
   
 

(1) Net of foreign taxes withheld of $667,670.

Statement of Changes in Net Assets

 

        

Year Ended
August 31,
2002

         

Year Ended
August 31,
2001

  
   
   
 

Increase (Decrease) in Net Assets

    

     

   

Operations--

    

     

 

Net investment income

   $

1,345,766

     $

1,453,548

  

Net realized loss on investments transactions

    

(59,392,247

 )    

(43,502,687

 )

Net realized loss on foreign currency

    

(882,998

 )    

(1,316,950

 )

Net change in unrealized appreciation (depreciation) of investments and foreign currency translation

    

12,302,179

      

(88,132,643

 )
   
   
 

Change in net assets resulting from operations

    

(46,627,300

 )    

(131,498,732

 )
   
   
 

Distributions to Shareholders--

    

     

 

Distributions to shareholders from net realized gain on investments

    

     

 

Investor Class of Shares

    

--

      

(33,371,017

 )

Advisor Class of Shares

    

--

      

(390,149

 )

Institutional Class of Shares

    

--

      

(15,060,189

 )
   
   
 

Change in net assets resulting from distributions to shareholders

    

--

      

(48,821,355

 )
   
   
 

Capital Stock Transactions--

    

     

 

Proceeds from sale of shares

    

218,685,271

      

247,575,054

  

Net asset value of shares issued to shareholders in payment of distributions declared

    

--

      

47,791,410

  

Cost of shares redeemed

    

(229,717,274

 )    

(243,821,846

 )
   
   
 

Change in net assets resulting from capital stock transactions

    

(11,032,003

 )    

51,544,618

  
   
   
 

Change in net assets

    

(57,659,303

 )    

(128,775,469

 )

Net Assets:

    

     

 

Beginning of period

    

359,570,929

      

488,346,398

  
   
   
 

End of period

   $

301,911,626

     $

359,570,929

  
   
   
 

Accumulated net operating loss included in net assets at end of period

   $

(792,391

 )   $

(3,039,914

 )
   
   
 

Financial Highlights -- Institutional Class of Shares (For a share outstanding throughout each period)

Period
Ended
August 31,

    

Net asset
value,
beginning
of period

    

Net
investment
income
(net
operating
loss)

    

Net realized
and
unrealized
gain (loss) on
investments
and
foreign
currency

    

Total from
investment
operations

    

Distributions to
shareholders
from net
investment
income

    

Distributions to
shareholders from
net realized gain
on investments
and foreign
currency
transactions

    

Total
distributions

    

Net asset
value, end
of period

    

Total
return(1)

Ratios to Average Net Assets

    

Net assets,
end of
period
(000
omitted)

    

Portfolio
turnover
rate
   

Expenses

    

Net
investment
income
(net operating
loss)

    

Expense
waiver/
reimbursement(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 

International Stock Fund

  

 

 

 

 

 

 

 

 

 

 

2000(3)

  

$13.83

  

(0.02)(4)

  

4.08

  

4.06

  

(0.18)

  

(1.36)

  

(1.54)

  

$16.35

  

28.34%

  

1.26%

  

(0.12)%

  

0.02%

  

$134,920

  

225%

2001

  

$16.35

  

0.07(4)

  

(4.04)

  

(3.97)

  

--

  

(1.61)

  

(1.61)

  

$10.77

  

(26.19)%

  

1.21%

  

0.55%

  

0.02%

  

$109,367

  

156%

2002

  

$10.77

  

0.06(4)

  

(1.46)

  

(1.40)

  

--

  

--

  

--

  

$9.37

  

(13.00)%

  

1.24%

  

0.59%

  

0.02%

  

$102,233

  

83%

(1) Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
(2) This voluntary expense decrease is reflected in both the expense and net investment income (net operating loss) ratios.
(3) Reflects operations for the period from September 1, 1999 (start of performance) to August 31, 2000.
(4) Per share information is based on average shares outstanding.

August 31, 2002

Notes to Financial Statements

1. Organization

Marshall Funds, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Corporation consists of eleven diversified portfolios. The financial statements included herein are only those of Marshall International Stock Fund (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective the Fund is to provide capital appreciation.

The Fund offers three classes of shares: Institutional Class of Shares, Investor Class of Shares and Advisor Class of Shares. The Financial Highlights of Investor Class of Shares and Advisor Class of Shares of the Fund are presented in separate annual reports.

2. Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States.

Investment Valuations-- Foreign equity securities are valued at the last sale price reported in the market in which they are primarily traded. If no sale on the recognized exchange is reported or the security is traded over-the-counter, the foreign securities are valued at the mean between the last closing bid and asked prices. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities purchased with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors (the "Directors").

Repurchase Agreements-- It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement, including accrued interest.

The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser or sub-advisor to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Directors. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities.

Investment Income, Expenses and Distributions-- Interest income and expenses are accrued daily. All discounts/premiums are accreted/amortized for financial reporting purposes as required. Gains and losses realized on pre-payment of mortgage-backed securities (pay-down gains and losses) are classified as part of interest income. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair market value. The Fund offers multiple classes of shares which differ in their respective distribution and service fees. All shareholders bear the common expense of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Reclassification-- Income and capital gain distributions are determined in accordance with income tax regulations which differ from generally accepted accounting principles ("GAAP"). These differences are primarily attributable to differing book/tax treatments of net operating loss and foreign currency transactions. Amounts as of August 31, 2002 have been reclassed to reflect the following:

Increase (Decrease)



Paid-in Capital

   

Accumulated
Net Realized
Gain

   


Undistributed Net
Investment Income

 
 

$(1,784,754)

 

$882,997

 

$901,757

Net investment income, net realized gain (loss) and net assets were not affected by this reclassification.

As of August 31, 2002, the Fund's tax composition of distributions was as follows:

Ordinary income

    

$

--

 

Long-term capital gains

 

 

--

 

As of August 31, 2002, the Fund's components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income

    

$

--

 

Undistributed long-term capital gains

 

 

--

 

Unrealized depreciation

 

 

(12,963,557

)

At year end, there were no significant differences between GAAP basis and tax basis of components of net assets, other than differences in the net unrealized appreciation (depreciation) in value of investments attributable to wash sales loss deferrals.

Federal Taxes-- It is the Fund's policy to comply with the provisions of Subchapter M of the Internal Revenue Code, as amended (the "Code") applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary.

Withholding taxes on foreign dividends have been provided for in accordance with the applicable country's tax rules and rates.

At August 31, 2002, the Fund for federal tax purposes, had a capital loss carry-forward of $65,732,674, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code such capital loss carryforward will expire as follows:

Expiration Year

   

Expiration Amount

2009

 

$ 2,042,934

2010

 

63,689,740

Additionally, net capital and currency losses of $36,566,228 and $792,391, respectively, attributable to security transactions incurred after October 31, 2001 are treated as arising on September 1, 2002, the first day of the Fund's next taxable year.

When-Issued and Delayed Delivery Transactions-- The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked-to-market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Exchange Contracts-- The Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross hedge against either specific transactions or portfolio positions. The objective of the Fund's foreign currency hedging transactions is to reduce the risk that the U.S. dollar value of the Fund's foreign currency denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are "marked-to-market" daily at the applicable translation rates resulting in unrealized gains or losses. Realized gains or losses are recorded at the time the foreign currency exchange contract is offset by entering into a closing transaction or by the delivery or receipt of the currency. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At August 31, 2002, the Fund had outstanding foreign exchange contracts as set forth below:

Settlement Date

     

Foreign Currency
Units to
Deliver/Receive

    

In
Exchange

    

Contract at
Value

    

Unrealized
Appreciation
(Depreciation)
 
 
 
 

Contracts sold:

  

 

  

 

 

09/03/2002

  

111,328 Euro Dollar

  

$ 109,380

  

$ 109,185

  

$ 195

09/03/2002

  

1,245,396 British Pound Sterling

  

1,917,909

  

1,927,624

  

(9,715)

09/03/2002

  

765,821 Singapore Dollar

  

436,863

  

437,650

  

(787)
   

Net Unrealized Depreciation on Foreign Currency Exchange Contacts

  

$ (10,307)
   

Foreign Currency Translation-- The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FCs") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Other-- Investment transactions are accounted for on a trade date basis.

Securities Lending-- The Fund participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. The Fund receives cash as collateral in return for the securities and record a corresponding payable for collateral due to the respective broker. The amount of cash collateral received is maintained at a minimum level of 100% of the prior day's market value on securities loaned. Collateral is reinvested by the Fund in short-term securities including overnight repurchase agreements, commercial paper, master notes, floating rate corporate notes (with at least quarterly reset rates) and money market funds. On May 18, 2000, the Securities and Exchange Commission issued an order to the Marshall Funds that exempts certain securities lending activities from prohibitions under the Investment Company Act of 1940. Under the terms of the exemptive order, (i) the Fund may pay a portion of net revenue to Marshall & Ilsley Trust Company N.A., ("M&I Trust") for its service as securities lending agent, and (ii) cash collateral received for a loan of the Fund's securities may be invested jointly with collateral received for loans of other Marshall Fund's securities.

As of August 31, 2002, the value of securities loaned, the payable on collateral due to broker and the value of reinvested cash collateral securities were as follows:

Market Value
of Securities
Loaned

    

Payable on
Collateral
Due to Broker

    

Reinvested
Collateral Securities

 
 

$55,378,548

 

$57,174,918

 

$57,174,918

Individual reinvested cash collateral securities at August 31, 2002 are as follows:

Investments

    

Total
 

Provident Money Market Fund

 

$6,528,260

Merrimac Money Market Fund

 

5,992,910

Dreyfus Cash Management Plus MMKT

 

4,757,028

Nationsbank Inst. Reserves

 

141,597

Reserves Primary 15

 

7,094,060

JP Morgan Master Note

 

1,844,455

MetLife Funding Agreement

 

2,837,624

Wisconsin Public Service Master Note

 

1,418,812

Monumental Life Ins. Master Note

 

2,128,218

Four Winds Funding LLC

 

2,837,624

Key Bank N.A.

 

1,419,365

Merrill Lynch & Co.

 

2,837,624

Washington Mutual Bank FA

 

2,128,218

American Honda Finance

 

2,128,218

Bendix Comm Vehicle System

 

2,128,218

Goldman Sachs Group

 

2,837,624

Household Finance Corp.

 

2,057,277

Questar Corp.

 

602,995

American Express Centurion

 

2,837,624

Wisconsin Energy Corp. Disc. C/P

 

2,617,167

3. Capital Stock

The Articles of Incorporation permit the Directors to issue an indefinite number of full and fractional shares of common stock, par value $0.0001 per share. At August 31, 2002, the capital paid-in was $417,966,476.

Transactions in capital stock were as follows:

 

   

Year Ended
August 31, 2002

 

 

Year Ended
August 31, 2001

 
   
   
 

 

 

Shares

 

   

Amount

 

   

Shares

 

   

Amount

 
   
   
   
   
 

INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

17,636,158

 

 

$

174,748,741

 

 

15,212,008

 

 

$

195,353,624

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

2,469,820

 

 

 

32,972,095

 

Shares redeemed

 

(19,632,221

)

 

 

(194,599,116

)

 

(16,197,785

)

 

 

(209,170,751

)
   
   
   
   
 

Net change resulting from Investor Class of Shares transactions

 

(1,996,063

)

 

$

(19,850,375

)

 

1,484,043

 

 

$

19,154,968

 
   
   
   
   
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

1,430,452

 

 

$

14,109,749

 

 

420,204

 

 

$

5,315,028

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

28,817

 

 

 

384,702

 

Shares redeemed

 

(1,312,246

)

 

 

(13,240,261

)

 

(251,427

)

 

 

(2,851,448

)
   
   
   
   
 

Net change resulting from Advisor Class of Shares transactions

 

118,206

 

 

$

869,488

 

 

197,594

 

 

$

2,848,282

 
   
   
   
   
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INSTITUTIONAL CLASS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

2,973,838

 

 

$

29,826,781

 

 

3,484,294

 

 

$

46,906,402

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

1,078,820

 

 

 

14,434,613

 

Shares redeemed

 

(2,217,162

)

 

 

(21,877,897

)

 

(2,661,048

)

 

 

(31,799,647

)
   
   
   
   
 

Net change resulting from Institutional Class of Shares transactions

 

756,676

 

 

$

7,948,884

 

 

1,902,066

 

 

$

29,541,368

 
   
   
   
   
 

Net change resulting from Fund Share transactions

 

(1,121,181

)

 

$

(11,032,003

)

 

3,583,703

 

 

$

51,544,618

 
   
   
   
   
 

4. Investment Adviser Fee and Other Transactions with Affiliates

Investment Adviser Fee-- M&I Investment Management Corp., the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 1.00% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

The Fund's sub-adviser is BPI Global Asset Management LLP (the "Sub-Adviser"). The Adviser compensates the Sub-Adviser based on the level of average aggregate daily net assets of the Fund.

Administrative Fee-- M&I Trust, under the Administrative Services Agreement, provides the Fund with Administrative personnel and services. The fee paid to M&I Trust is based on the Fund's average daily net assets ("ADNA") as follows:

Maximum Fee   Fund's ADNA
   

0.100%

  

on the first $250 million

0.095%

  

on the next $250 million

0.080%

  

on the next $250 million

0.060%

  

on the next $250 million

0.040%

  

on the next $500 million

0.020%

  

on assets in excess of $1.5 billion

Federated Administrative Services is the sub-administrator and will be paid by M&I Trust, not by the Fund.

Distribution Services Fee --The Fund has adopted a Distribution Plan (the "Plan'') pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC''), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of shares of the Fund's Advisor Class of Shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of Fund's Advisor Class of Shares (except Money Market Fund's Advisor Class of Shares which may accrue up to 0.30%) annually, to compensate FSC. Effective October 31, 2002, the principal distributor will change to Edgewood Services, Inc.

Shareholder Services Fee --Under the terms of a Shareholder Services Agreement with Marshall Investor Services ("MIS''), the Fund will pay MIS up to 0.25% of average daily net assets of the Fund's Investor and Advisor Class of Shares for the period, MIS may voluntarily choose to waive any portion of its fee. MIS can modify or terminate this voluntary waiver at any time at its sole discretion.

Transfer and Dividend Disbursing Agent Fees and Expenses-- Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company ("FSSC"), serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees-- FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses.

Custodian Fees-- M&I Trust is the Fund's custodian. The fee is based on the level of the Fund's average daily net assets for the period. The custodian also charges a fee in connection with securities lending activities of the Fund.

General-- Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees of one or more of the above companies.

5. Investment Transactions

Purchases and sales of investments, excluding short-term securities, for the year ended August 31, 2002, were as follows:

Purchases

         

$265,811,390
Sales   $271,464,009

6. Line of Credit

Marshall Funds, Inc., on behalf of its respective Funds (except for the Money Market Fund) entered into a $50,000,000 unsecured, committed revolving line of credit ("LOC") agreement with State Street Bank & Trust Company. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate of 0.50% per annum over the Federal Funds Rate. The LOC includes a commitment fee of 0.10% per annum on the daily unused portion. The Fund did not utilize the LOC during the year ended August 31, 2002.

FEDERAL INCOME TAX INFORMATION

The Fund did not designate any long-term capital gain distributions for the year ended August 31, 2002.

Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors and Shareholders of
Marshall Funds, Inc.

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Marshall International Stock Fund (a portfolio of Marshall Funds, Inc.) (the "Fund"), as of August 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from the brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Marshall International Stock Fund at August 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ernst & Young LLP

Boston, Massachusetts
October 15, 2002

Board of Directors and Corporation Officers

The following tables give information about each Board member and the senior officers of the Funds. The tables separately list Board members who are "interested persons" of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent" Board members). Marshall Funds, Inc. consists of eleven investment company portfolios. Unless otherwise noted, each Board member oversees all portfolios in Marshall Funds, Inc. and serves for an indefinite term. The Funds' Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-236-FUND (3863).

INTERESTED DIRECTORS BACKGROUND

Name
Age
Address
Positions Held with Corporation
Length of Time Served

    

Principal Occupation(s), Previous Positions and Other Directorships Held

John M. Blaser*
Age: 45
1000 North Water Street
Milwaukee, WI
PRESIDENT AND DIRECTOR
Began serving: May 1999

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.
Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.

David W. Schulz*
Age: 44
1000 North Water Street
Milwaukee, WI
DIRECTOR
Began serving: May 1999

 

Principal Occupations: President and Director, M&I Investment Management Corp.; Vice President, M&I Trust.
 

 

 

* Reasons for Interested Status: Mr. Blaser and Mr. Schulz are "interested" due to positions that they hold with M&I Investment Management Corp., the Funds' Adviser.

 

 

 

INDEPENDENT DIRECTORS BACKGROUND

John DeVincentis
Age: 68
13821 12th Street
Kenosha, WI
DIRECTOR
Began serving: October 1993

 

Principal Occupations: Independent Financial Consultant; Retired, formerly, Senior Vice President of Finance, In-Sink-Erator Division of Emerson Electric Corp. (electrical products manufacturer).

Duane E. Dingmann
Age: 71
1631 Harding Ave
Eau Claire, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Retired; formerly President and owner, Trubilt Auto Body, Inc. and Telephone Specialists, Inc.
Other Directorships Held: Class B (nonbanking) Director, Ninth Federal Reserve District, Minneapolis, MN.

James Mitchell
Age: 55
2808 Range Line Circle
Mequon, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Chief Executive Officer, NOG, Inc.; Chairman, Ayrshire Precision Engineering.
Previous Positions: Group Vice President, Citation Corporation; Chief Executive Officer, Interstate Forging Industries.

Barbara J. Pope
Age: 54
Suite 2285
115 South La Salle Street
Chicago, IL
DIRECTOR
Began serving: March 1999

 

Principal Occupation: President, Barbara J. Pope, P.C., (financial consulting firm); President, Sedgwick Street Fund LLC; which is the general partner of a private investment partnership.
 

OFFICERS

 

 

Name
Age
Address
Positions Held with Corporation

    

Principal Occupation(s) and Previous Positions

John M. Blaser
Age: 45
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
PRESIDENT

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.
Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.

John D. Boritzke
Age: 46
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

William A. Frazier
Age: 47
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

Brooke J. Billick
Age: 48
M&I Trust
1000 Water Street
Milwaukee, WI
SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.
Previous Positions: Shareholder, Gibbs, Roper, Loots & Williams, SC.

Lori K. Hoch
Age: 31
M&I Trust
1000 Water Street
Milwaukee, WI
ASSISTANT SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.
Previous Positions: Associate, Michael, Best & Friedrich LLP; Associate, Quarles & Brady LLP.

Joseph P. Bree
Age: 29
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
TREASURER

 

Principal Occupations: Investment Officer and Senior Financial Analyst, M&I Investment Management Corp.
Previous Positions: Associate, Barclays Global Investors; Associate, Strong Capital Management.

Mutual funds are not bank deposits or obligation, are not guaranteed by any bank, and
are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. Investment in
mutual funds involves investment risks, including the possible loss of principal.

This report is authorized for distribution to prospective investors only when preceded
or accompanied by the Funds' prospectus, which contains facts concerning each
Fund's objective and policies, management fees, expenses, and other information.

[Logo of Marshall Funds]

Marshall Investor Services
PO Box 1348
Milwaukee, Wisconsin 53201-1348
800-236-FUND(3863)
TDD: Speech and Hearing Impaired Services
800-209-3520
www.marshallfunds.com

Edgewood Services, Inc., Distributor 25801 (10/02)
M&I Investment Management Corp., Investment Adviser
©2002 Marshall Funds, Inc.

[Logo of Marshall Funds]

The Marshall Funds Family

Annual Report

The Institutional Class of Shares
(Class I)

•Marshall Money Market Fund

AUGUST 31, 2002

Table of Contents

Commentary      1
Financial Information    
Portfolio of Investments   2
Statement of Assets and Liabilities   5
Statement of Operations   6
Statement of Changes in Net Assets   7
Financial Highlights   8
Notes to Financial Statements   9
Directors & Officers   14

Annual Report -- Commentary

[Photo of Richard M. Rokus]

Richard M. Rokus, CFA

Marshall Money Market Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 2.25%.* In comparison, the Lipper Money Market Funds Index (LMMFI) returned 1.74%, while iMoneyNet, Inc. Money Fund Report AveragesTM (MFRA) returned 1.67%.** As of August 31, 2002, the Fund's 7-day net yield was 1.75%.***

Factors Affecting Performance

Within weeks after the September 11 terrorist attacks, the Federal Reserve Board (the "Fed") cut the federal funds target rate, the amount charged to member banks for overnight loans, from 3.5% to 1.75% where it has remained through the end of the fiscal year. The Fed's attempt to boost economic growth by lowering rates has had limited success. Although the economy, as measured by the Gross Domestic Product, appeared to emerge from recession in late 2001 and early 2002, there was concern that the Fed's actions were wearing off and that a "double dip" recession could take place.

The Fund's superior total return partly reflects the purchase of high quality one-year securities when interest rates were higher. In addition, the Fund has generally avoided the commercial paper of companies that have received unfavorable news coverage.

Another factor has reduced the appeal of commercial paper: scarcity. With interest rates low, the supply of commercial paper, typically with maturities of 30 to 365 days, has become sparse, as a number of major issuers have elected to issue debt with maturities beyond one year.

Looking Ahead

Because of the weak economy, it is likely that interest rates will remain at low levels for the next several months. At the same time, the Fed would not likely reduce short-term rates since 1.75% is already the lowest level in 40 years. Moreover, the Fed does not want to find itself in the position of the Japanese central bank, in which interest rates were virtually lowered to zero without much influence on economic growth.

Because interest rates are so low, part of the Fund's strategy is to add floating rate securities in which yields reset frequently. Partly because the expectation is that the Fed is likely to stand put, the extra yield offered by 90-day commercial paper over the federal funds target rate is virtually zero. The Fund will add longer-term securities when yields become more attractive. How soon that happens may depend on the long-awaited recovery picking up steam.

* Past performance is no guarantee of future results. Yields may vary. Yields quoted for money market funds most closely reflect the Fund's current earnings.

** Money Fund ReportTM, a service of iMoney Net, Inc. (formerly IBC Financial Data) publishes annualized yields of hundreds of money market funds on a weekly basis, and through its Money Market Insight publication reports monthly and year-to-date investment results for the same money funds. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated. They do not reflect sales charges.

*** The 7-day net annualized yield is based on the average net income per share for the 7 days ended on the date of calculation and the offering price on that date. The 7-day effective yield is annualized and reflects daily compounding of the 7-day net yield.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

August 31, 2002

Portfolio of Investments

Money Market Fund

Description

    

Principal
Amount

    

Value

Certificate of Deposit -- 0.7%

 

 

 

 

 

   

Foreign Banks -- 0.7%

 

 

 

 

 

 

Canadian Imperial Bank of Commerce, NY, 2.500%, 12/27/2002

 

$

20,000,000

 

$

19,986,901

(1)Commercial Paper -- 28.0%

Asset-Backed -- 10.6%

 

(2)(3)Liquid Funding Ltd., 1.750% - 1.790%, 10/10/2002 - 10/28-2002

 

 

75,000,000

 

 

74,821,296

 

(2)(3)Scaldis Capital Ltd., 1.830%, 9/12/2002 -9/25/2002

 

 

57,002,000

 

 

56,965,138

 

(2)(3)Sigma Finance, Inc. (Guaranteed by Sigma Finance Corp.), 1.850%, 10/4/2002

 

 

35,000,000

 

 

34,940,967

 

(2)(3)Tannehill Capital Co., 1.790% - 1.825%, 9/18/2002 - 10/21/2002

 

 

75,000,000

 

 

74,892,756

 

(2)(3)World Omni Vehicle Leasing, Inc., 1.760% -1.770%, 9/10/2002 -9/17/2002

 

 

65,000,000

 

 

64,966,200

 

 

 

 

 

 

 

306,586,357

 

Electric -- 2.2%

 

 

 

 

 

 

 

(2)(3)Wisconsin Energy Corp., 1.880% - 1.900%, 9/18/2002 - 9/26/2002

 

 

64,200,000

 

 

64,126,978

 

Foreign Banks -- 2.5%

 

 

 

 

 

 

 

(2)(3)Depfa-Bank, 1.700%, 10/25/2002

 

 

40,000,000

 

 

39,898,000

 

Spintab-Swedmortgage AB, 1.810%, 10/7/2002

 

 

32,500,000

 

 

32,441,175

 

 

 

 

 

 

 

72,339,175

 

Healthcare -- 5.2%

 

 

 

 

 

 

 

Baxter International, Inc., 1.770% - 1.780%, 9/12/2002 - 10/15/2002

 

 

74,607,000

 

 

74,522,048

 

(2)(3)Wyeth, 1.880% - 1.900%, 9/5/2002 - 10/2/2002

 

 

75,000,000

 

 

74,934,380

 

 

 

 

 

 

 

149,456,428

 

Mining -- 2.3%

 

 

 

 

 

 

 

(2)(3)Rio Tinto Ltd., 1.710%, 11/7/2002 - 11/8/2002

 

 

66,301,000

 

 

66,088,041

 

Mortgage Banking -- 2.6%

 

 

 

 

 

 

 

Countrywide Home Loans, Inc., 1.820% - 1.840%, 9/4/2002 - 9/20/2002

 

 

75,000,000

 

 

74,968,139

 

Telecommunications -- 2.6%

 

 

 

 

 

(2)(3)Verizon Global Funding, 1.947%, 9/16/2002

 

$

75,000,000

 

$

74,996,592
Total Commercial Paper

 

 

 

 

 

808,561,710

Corporate Bonds -- 4.6%

 

 

 

 

 

 

Banks -- 0.5%

 

 

 

 

 

 

 

Wells Fargo & Co., 6.500%, 9/3/2002

 

 

13,500,000

 

 

13,502,000

 

Computer Services -- 1.0%

 

 

 

 

 

 

International Business Machines Corp., 5.800%, 9/9/2002

 

 

29,000,000

 

 

29,018,984

 

Healthcare -- 1.2%

 

 

 

 

 

 

 

(2)(3)Lilly (Eli) & Co., 4.226%, 3/22/2003

 

 

15,000,000

 

 

15,115,389

 

(2)(3)Merck & Co., Inc., 4.540%, 2/24/2003

 

 

20,000,000

 

 

20,204,198

 

 

 

 

 

 

 

35,319,587

 

Personal Credit -- 1.4%

 

 

 

 

 

 

 

(2)(3)BMW US Capital LLC, 4.248%, 6/7/2003

 

 

40,000,000

 

 

40,418,271

 

Telecommunications -- 0.5%

 

 

 

 

(2)(3)SBC Communications, Inc., 4.295%, 6/5/2003

 

15,000,000

 

 

15,172,347

Total Corporate Bonds

 

 

 

 

 

133,431,189

(4)Variable-Rate Notes -- 59.1%

 

 

 

Banks -- 6.9%

 

 

 

 

American Express Centurion Bank, DE, 1.760%, 9/14/2002

 

 

15,000,000

 

 

14,999,064

 

American Express Centurion Bank, DE, 1.767%, 9/12/2002

 

 

15,000,000

 

 

15,000,000

 

Bank One Corp., 1.970%, 11/14/2002

 

 

10,000,000

 

 

10,010,987

 

Bank One Corp., 1.980%, 11/15/2002

 

 

24,500,000

 

 

24,526,933

 

Bank One, Illinois, N.A., 1.967%, 9/17/2002

 

 

13,500,000

 

 

13,514,658

 

Bank One, N.A., 1.870%, 11/7/2002

 

 

10,000,000

 

 

10,004,407

 

First Union National Bank, 2.030%, 9/20/2002

 

 

45,000,000

 

 

45,023,838

 

J.P. Morgan Chase & Co., 1.935%, 10/30/2002

 

 

15,000,000

 

 

15,009,480

 

Mellon Financial Corp., 2.207%, 9/14/2002

 

 

51,100,000

 

 

51,107,358

 

 

 

 

 

 

 

199,196,725

 

Broker/Dealers -- 15.9%

 

 

 

 

 

 

 

(2)(3)Bank of America, 1.917%, 12/02/2002

 

$

75,000,000

 

$

75,000,000

 

(2)(3)Bear Stearns Cos., Inc., 1.906%, 12/5/2002

 

 

75,000,000

 

 

75,000,000

 

Credit Suisse First Boston USA, Inc., 1.847%, 9/17/2002

 

 

75,000,000

 

 

75,000,000

 

Goldman Sachs & Co., 1.850%, 9/30/2002

 

 

30,000,000

 

 

30,000,000

 

Goldman Sachs & Co., 2.047%, 9/17/2002

 

 

5,000,000

 

 

5,004,321

 

(2)(3)Goldman Sachs & Co., 2.090%, 10/3/2002

 

 

30,000,000

 

 

30,042,068

 

Goldman Sachs & Co., 2.227%, 9/17/2002

 

 

10,000,000

 

 

10,017,371

 

(2)(3)J.P. Morgan & Co., Inc., 1.830%, 10/01/2002

 

 

35,000,000

 

 

35,000,000

 

Merrill Lynch & Co., Inc., 1.827%, 9/12/2002

 

 

20,000,000

 

 

20,000,000

 

Merrill Lynch & Co., Inc., 2.010%, 10/30/2002

 

 

10,000,000

 

 

10,006,817

 

Merrill Lynch & Co., Inc., 2.012%, 11/5/2002

 

 

29,000,000

 

 

29,020,544

 

Merrill Lynch & Co., Inc., 2.092%, 11/5/2002

 

 

16,000,000

 

 

16,031,549

 

Morgan Stanley, 2.040%, 10/8/2002

 

 

48,525,000

 

 

48,585,448

 

 

 

 

 

 

 

458,708,118

 

Construction Equipment -- 2.6%

 

 

 

 

Caterpillar Financial Services Corp., 1.940%, 10/9/2002

 

 

75,000,000

 

 

75,000,000

 

Diversified Manufacturing -- 2.6%

 

 

 

(2)ABB Capital USA, 2.016%, 12/6/2002

 

 

75,000,000

 

 

75,000,000

 

Drugs -- 2.1%

 

 

 

 

 

 

 

(2)(3)Bayer Corp., 4.450%, 3/19/2003

 

 

60,000,000

 

 

60,481,525

 

Insurance -- 11.6%

 

 

 

 

 

 

 

(2)GE Life and Annuity Assurance Co., 1.930%, 10/22/2002

 

 

75,000,000

 

 

75,000,000

 

(2)(3)Jackson National Life Insurance Co., 1.800%, 11/1/2002

 

 

40,000,000

 

 

40,000,000

 

(2)(3)John Hancock, Global Funding II, 1.920%, 10/2/2002

 

 

8,000,000

 

 

8,004,284

 

(2)(3)John Hancock, Global Funding II, 2.037%, 9/16/2002

 

 

35,000,000

 

 

35,052,470

 

(2)(3)Metropolitan Life Insurance Co., 1.888%, 11/3/2002

 

$

50,000,000

 

$

50,000,000

 

(2)Monumental Life Insurance Co., 1.930%, 10/1/2002

 

 

25,000,000

 

 

25,000,000

 

(2)Monumental Life Insurance Co., 1.920%, 10/1/2002

 

 

10,000,000

 

 

10,000,000

 

(2)Monumental Life Insurance Co., 2.010%, 10/1/2002

 

 

40,000,000

 

 

40,000,000

 

(2)Travelers Insurance Co., 1.882%, 11/1/2002

 

 

50,000,000

 

 

50,000,000

 

 

 

 

 

 

 

333,056,754

 

Mortgage Banking -- 1.7%

 

 

 

 

 

 

(2)(3)Northern Rock PLC, 1.750%, 11/14/2002

 

 

50,000,000

 

 

50,000,000

 

Other Consumer
Non-Durables -- 2.5%

 

 

(2)(3)Unilever Capital Corp., 1.974%, 10/24/2002

 

 

71,110,000

 

 

71,128,398

 

Personal Credit -- 6.8%

 

 

 

 

 

 

 

American Express Credit Corp., 1.810%, 9/26/2002

 

 

45,000,000

 

 

45,000,000

 

(2)(3)American Honda Finance Corp., 1.830%, 10/22/2002

 

 

50,000,000

 

 

50,000,000

 

(2)(3)American Honda Finance Corp., 1.860%, 9/12/2002

 

 

25,000,000

 

 

25,000,000

 

Associates Corp. of North America, 1.940%, 9/26/2002

 

 

50,000,000

 

 

50,000,000

 

BMW US Capital LLC, 1.867%, 11/12/2002

 

 

10,000,000

 

 

9,999,541

 

Household Finance Corp., 1.890%, 9/13/2002

 

 

14,500,000

 

 

14,500,000

 

 

 

 

 

 

 

194,499,541

 

Student Loan -- 2.6%

 

 

 

 

 

 

 

USA Education, Inc., 1.937%, 9/16/2002

 

 

75,000,000

 

 

75,000,000

 

Telecommunications -- 3.8%

 

 

 

 

BellSouth Telecommunications, Inc., 1.907%, 12/4/2002

 

 

75,000,000

 

 

75,000,000

 

SBC Communications, Inc., 1.857%, 9/16/2002

 

 

35,000,000

 

 

35,000,000

 

 

 

 

 

 

 

110,000,000
Total Variable-Rate Notes

 

 

 

 

 

1,702,071,061
             

Description

Shares or
Principal
Amount

Value

 

Mutual Funds -- 0.1%

 

 

 

 

 

 

 

American Select Cash Reserve Fund

 

 

1,155,801

 

$

1,155,801

 

Dreyfus Cash Management Fund

 

 

1,721,186

 

 

1,721,186

 

Goldman Sachs Financial Square Money Market Fund

 

 

1,004,029

 

 

1,004,029

Total Mutual Funds (Shares at net asset value)

 

 

 

 

 

3,881,016

(5)Repurchase Agreements -- 7.3%

 

 

 

 

Deutsche Bank Financial, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

$

35,000,000

 

 

35,000,000

 

First Union Capital Market, Inc., 1.940%, dated 8/30/2002, due 9/3/2002

 

 

85,000,000

 

 

85,000,000

 

Morgan Stanley Group, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

 

65,000,000

 

 

65,000,000

 

Salomon Smith Barney, Inc., 1.925%, dated 8/30/2002, due 9/3/2002

 

 

25,000,000

 

 

25,000,000

Total Repurchase Agreements

 

 

 

 

 

210,000,000

Total Investments (at amortized cost)

 

 

 

 

$

2,877,931,877

(1) Each issue shows the rate of discount at the time of purchase.

(2) Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At August 31, 2002, these securities amounted to $1,597,249,298 which represents 55.4% of net assets.

(3) Denotes restricted security which has been deemed liquid by the Fund's Board of Directors.

(4) Current rate and next demand rate shown.

(5) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on current market prices.

Note: The categories of investments are shown as a percentage of net assets ($2,881,806,262) at August 31, 2002.

August 31, 2002

Statement of Assets and Liabilities

Assets:     

Investments in securities, at amortized cost and value  

$ 2,667,931,877
Investments in repurchase agreements  

210,000,000
Income receivable  

9,521,424
Receivable for capital stock sold  

14,176,295
Total assets  

2,901,629,596
Liabilities:  

Payable for capital stock redeemed  

15,918,438
Payable for income distribution  

2,801,647
Accrued expenses  

1,103,249
Total liabilities  

19,823,334
Total Net Assets  

$ 2,881,806,262
Net Assets Consist of:  

Paid-in-capital  

2,881,959,091
Accumulated net realized loss on investments  

(152,829 )
Total Net Assets  

$ 2,881,806,262
Net Asset Value, Offering Price and Redemption Proceeds Per Share  

Investor Class of Shares:  

Net Asset Value, Offering Price and Redemption proceeds Per Share  

$ 1.00
Advisor Class of Shares:  

Net Asset Value, Offering Price and Redemption proceeds Per Share  

$ 1.00
Institutional Class of Shares:  

Net Asset Value, Offering Price and Redemption proceeds Per Share  

$ 1.00
Net Assets:  

Investor Class of Shares:  

$ 1,857,948,270
Advisor Class of Shares:  

113,661,689
Institutional Class of Shares:  

910,196,303
Total Net Assets  

$ 2,881,806,262
Shares Outstanding:  

Investor Class of Shares:  

1,858,049,903
Advisor Class of Shares:  

113,674,060
Institutional Class of Shares:  

910,235,128
Total Shares Outstanding  

2,881,959,091

Year Ended August 31, 2002

Statement of Operations

Investment Income:     

 
Interest income  

$ 73,982,086

  
Expenses:  

 
Investment adviser fee  

4,597,139

  
Shareholder services fees--  

 
Investor Class of Shares  

4,791,577

  
Advisor Class of Shares  

322,428

  
Administrative fees  

1,350,452

  
Custodian fees  

330,623

  
Portfolio accounting fees  

244,537

  
Transfer and dividend disbursing agent fees  

466,043

  
Registration fees  

99,751

  
Auditing fees  

14,710

  
Legal fees  

4,256

  
Printing and postage  

65,768

  
Directors' fees  

7,273

  
Insurance premiums  

11,704

  
Distribution services fees--  

 
Advisor Class of Shares  

386,913

  
Miscellaneous  

35,478

  
Total expenses  

12,728,652

  
Deduct--  

 
Waiver of investment adviser fee  

(1,098,213

 )
Net expenses  

11,630,439

  
Net investment income  

62,351,647

  
Net Realized Loss on Investments:  

 
Net realized loss on investment transactions  

(7,007

 )
Change in net assets resulting from operations  

$ 62,344,640

  

Statement of Changes in Net Assets

 

    

Year Ended
August 31,
2002

         

Year Ended
August 31,
2001

    
Increase (Decrease) in Net Assets  

   

 
Operations--  

   

 
Net investment income  

$ 62,351,647

    

$ 128,213,532

  
Net realized loss on investment transactions  

(7,007

 )  

(145,822

 )
Change in net assets resulting from operations  

62,344,640

    

128,067,710

  
Distributions to Shareholders--  

   

 
Distributions to shareholders from net investment income:  

   

 
Investor Class of Shares  

(37,389,606

 )  

(92,313,480

 )
Advisor Class of Shares  

(2,174,238

 )  

(6,001,217

 )
Institutional Class of Shares  

(22,787,803

 )  

(29,898,835

 )
Change in net assets resulting from distributions to shareholders  

(62,351,647

 )  

(128,213,532

 )
Capital Stock Transactions--  

   

 
Proceeds from sale of shares  

10,014,120,035

    

9,007,684,945

  
Net asset value of shares issued to shareholders in payment of distributions declared  

16,309,836

    

30,419,965

  
Cost of shares redeemed  

(9,888,216,033

 )  

(8,357,725,162

 )
Change in net assets resulting from capital stock transactions  

142,213,838

    

680,379,748

  
Change in net assets  

142,206,831

    

680,233,926

  
Net Assets:  

   

 
Beginning of period  

2,739,599,431

    

2,059,365,505

  
End of period  

$ 2,881,806,262

    

$ 2,739,599,431

  

Financial Highlights--Institutional Class of Shares (For a share outstanding throughout each period)

Year
Ended
August 31,

     

Net asset
value,
beginning
of period

     

Net
investment
income

     

Distributions to
shareholders
from net
investment
income

     

Net asset
value, end
of period

     

 

    

Ratios to Average Net Assets

     

Net assets,
end
of period
(000 omitted)

Total
return (1)

Expenses

     

Net investment
income

     

Expense
waiver (2)
2000 (3)  

$ 1.00

  

0.03

  

(0.03)

  

$ 1.00

  

2.63%

  

0.24%(4)

  

6.51%(4)

  

0.05%(4)

  

$ 141,909
2001  

$ 1.00

  

0.05

  

(0.05)

  

$ 1.00

  

5.58%

  

0.21%

  

4.98%

  

0.05%

  

$ 914,693
2002  

$ 1.00

  

0.02

  

(0.02)

  

$ 1.00

  

2.25%

  

0.20%

  

2.24%

  

0.04%

  

$ 910,196

(1) Based on net asset value, which does not reflect the sales charge or contigent deferred sales charge, if applicable.
(2) This voluntary expense decrease is reflected in both the expense and net investment income ratios.
(3) Reflects operations for the period from April 3, 2000 (start of performance) to August 31, 2000.
(4) Computed on an annualized basis.

August 31, 2002

Notes to Financial Statements

1. Organization

Marshall Funds, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Corporation consists of eleven diversified portfolios. The financial statements included herein are only those of Marshall Money Market Fund (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment the objective of the Fund is to provide current income consistent with stability of principal.

The Fund offers three classes of shares: Invester Class of Shares, Advisor Class of Shares and Institutional Class of Shares. The financial highlights of Investor Class of Shares and Advisor Class of Shares of the Fund are presented in separate annual reports.

2. Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States.

Investment Valuations--Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities purchased with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair market value. The Fund's use of the amortized cost method to value portfolio securities is in accordance with Rule 2a-7 under the Act. Investments in other open-end regulated investment companies are valued at net asset value.

Repurchase Agreements--It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement, including accrued interest.

The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Board of Directors (the "Directors"). Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities.

Investment Income, Expenses and Distributions--Interest income and expenses are accrued daily. All discount/premiums are accreted/amortized as required. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair market value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

As of August 31, 2002, the Fund's tax composition of distributions was as follows:

Ordinary Income

    

$62,351,647

Long-Term Capital Gains

 

--

As of August 31, 2002, the Fund's components of distributable earnings on a tax basis were as follows:

Undistributed Ordinary Income

    

$2,801,648

Undistributed Long-Term Capital Gains

 

--

Federal Taxes--It is the Fund's policy to comply with the provisions of Subchapter M of the Internal Revenue Code, as amended, (the "Code") applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary.

At August 31, 2002, the Fund for federal tax purposes, had a capital loss carryforward of $145,822, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code such capital loss carryforward will expire in 2010.

Additionally, net capital losses of $7,007 attributable to security transactions incurred after October 31, 2001 are treated as arising on September 1, 2002, the first day of the Fund's next taxable year.

When-Issued and Delayed Delivery Transactions--The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked-to-market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Restricted Securities--Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act.

Additional information on each illiquid restricted security held at August 31, 2002 is as follows:

Security

     

Acquisition Date

     

Acquisition Cost

ABB Capital USA

  

11/14/2001

  

$75,000,000

GE Life & Annuity Fund Agreement

  

4/22/2000

  

75,000,000

Monumental Life Funding Agreement

  

8/2/1993-11/30/1993

  

40,000,000

Monumental Life Funding Agreement

  

10/15/1996

  

10,000,000

Monumental Life Funding Agreement

  

1/4/2000

  

25,000,000

Travelers Insurance Company

  

1/19/2001

  

50,000,000

Other--Investment transactions are accounted for on a trade date basis.

3. Capital Stock

The Articles of Incorporation permit the Directors to issue an indefinite number of full and fractional shares of common stock, par value $0.0001 per share. At August 31, 2002, the capital paid-in for the Fund was $2,881,959,091.

Transactions in capital stock were as follows:

 

    

Year Ended
August 31, 2002

 

    

Year Ended
August 31, 2001

 

 

 

Shares

 

    

Amount

 

 

Shares

 

    

Amount

 

MONEY MARKET FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

Shares sold

 

5,427,591,574

 

 

$

5,427,591,574

 

 

5,349,844,467

 

 

$

5,349,844,467

 

Shares issued to shareholders in payment of distributions declared

 

11,415,196

 

 

 

11,415,196

 

 

22,470,409

 

 

 

22,470,409

 

Shares redeemed

 

(5,278,253,683

)

 

 

(5,278,253,683

)

 

(5,451,687,216

)

 

 

(5,451,687,216

)

Net change resulting from Investor Class of Shares transactions

 

160,753,087

 

 

$

160,753,087

 

 

(79,372,340

)

 

$

(79,372,340

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

281,645,796

 

 

$

281,645,796

 

 

440,122,578

 

 

$

440,122,578

 

Shares issued to shareholders in payment of distributions declared

 

2,132,999

 

 

 

2,132,999

 

 

5,940,215

 

 

 

5,940,215

 

Shares redeemed

 

(297,823,697

)

 

 

(297,823,697

)

 

(459,131,150

)

 

 

(459,131,150

)

Net change resulting from Advisor Class of Shares transactions

 

(14,044,902

)

 

$

(14,044,902

)

 

(13,068,357

)

 

$

(13,068,357

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--INSTITUTIONAL CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

4,304,882,665

 

 

$

4,304,882,665

 

 

3,217,717,900

 

 

$

3,217,717,900

 

Shares issued to shareholders in payment of distributions declared

 

2,761,641

 

 

 

2,761,641

 

 

2,009,341

 

 

 

2,009,341

 

Shares redeemed

 

(4,312,138,653

)

 

 

(4,312,138,653

)

 

(2,446,906,796

)

 

 

(2,446,906,796

)

Net change resulting from Institutional Class of Shares transactions

 

(4,494,347

)

 

$

(4,494,347

)

 

772,820,445

 

 

$

772,820,445

 

Net change resulting from Fund Share transactions

 

142,213,838

 

 

$

142,213,838

 

 

680,379,748

 

 

$

680,379,748

 

4. Investment Adviser Fee and Other Transactions with Affiliates

Investment Adviser Fee--M&1 Investment Management Corp., the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.15% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Administrative Fee--Marshall & Ilsley Trust Company N.A. (M&I Trust), under the Administrative Services Agreement, provides the Funds with administrative personnel and services. The fee paid to M&I Trust is based on the Fund's average daily net assets as follows:

Maximum Fee

    

Fund's Average Daily Net Assets

0.100%  

on the first $250 million
0.095%  

on the next $250 million
0.080%  

on the next $250 million
0.060%  

on the next $250 million
0.040%  

on the next $500 million
0.020%  

on assets in excess of $1.5 billion

Federated Administrative Services is the sub-administrator and will be paid by M&I Trust, not by the Fund.

Distribution Services Fee--The Fund has adopted a Distribution Plan (the "Plan'') pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Services Corp. ("FSC''), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of shares of the Fund's Advisor Class of Shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of Fund's Advisor Class of Shares (except Money Market Fund's Advisor Class of Shares which may accrue to 0.30%) annually, to compensate FSC. Effective October 31, 2002, the principal distributor will change to Edgewood Services, Inc.

Shareholder Services Fee--Under the terms of a Shareholder Services Agreement with Marshall Investor Services ("MIS''), the Fund will pay MIS up to 0.25% of average daily net assets of the Fund's Investor and Advisor Class of Shares for the period, MIS may voluntarily choose to waive any portion of its fee. MIS can modify or terminate this voluntary waiver at any time at its sole discretion.

Transfer and Dividend Disbursing Agent Fees and Expenses--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholder Services Company ("FSSC"), serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees--FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of each Fund's average daily net assets for the period, plus out-of-pocket expenses.

Custodian Fees--M&I Trust is the Fund's custodian. M&I Trust receives fees based on the level of each Fund's average daily net assets for the period.

General--Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees of one or more of the above companies.

Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors and Shareholders of
Marshall Funds, Inc.:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Marshall Money Market Fund (a portfolio of Marshall Funds, Inc) (the "Fund"), as of August 31, 2002, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Marshall Money Market Fund at August 31, 2002, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ernst & Young LLP

Boston, Massachusetts
October 15, 2002

Board of Directors and Corporation Officers

The following tables give information about each Board member and the senior officers of the Funds. The tables separately list Board members who are "interested persons" of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent" Board members). Marshall Funds, Inc. consists of eleven investment company portfolios. Unless otherwise noted, each Board member oversees all portfolios in Marshall Funds, Inc. and serves for an indefinite term. The Funds' Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-236-FUND (3863).

INTERESTED DIRECTORS BACKGROUND

Name
Age
Address
Positions Held with Corporation
Length of Time Served

    

Principal Occupation(s), Previous Positions and Other Directorships Held

John M. Blaser*
Age: 45
1000 North Water Street
Milwaukee, WI
PRESIDENT AND DIRECTOR
Began serving: May 1999

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.
Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.

David W. Schulz*
Age: 44
1000 North Water Street
Milwaukee, WI
DIRECTOR
Began serving: May 1999

 

Principal Occupations: President and Director, M&I Investment Management Corp.; Vice President, M&I Trust.
* Reasons for Interested Status: Mr. Blaser and Mr. Schulz are "interested" due to positions that they hold with M&I Investment Management Corp., the Funds' Adviser.

 

 

 

INDEPENDENT DIRECTORS BACKGROUND

John DeVincentis
Age: 68
13821 12th Street
Kenosha, WI
DIRECTOR
Began serving: October 1993

 

Principal Occupations: Independent Financial Consultant; Retired, formerly, Senior Vice President of Finance, In-Sink-Erator Division of Emerson Electric Corp. (electrical products manufacturer).

Duane E. Dingmann
Age: 71
1631 Harding Ave
Eau Claire, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Retired; formerly President and owner, Trubilt Auto Body, Inc. and Telephone Specialists, Inc.
Other Directorships Held: Class B (nonbanking) Director, Ninth Federal Reserve District, Minneapolis, MN.

James Mitchell
Age: 55
2808 Range Line Circle
Mequon, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Chief Executive Officer, NOG, Inc.; Chairman, Ayrshire Precision Engineering.
Previous Positions: Group Vice President, Citation Corporation; Chief Executive Officer, Interstate Forging Industries.

Barbara J. Pope
Age: 54
Suite 2285
115 South La Salle Street
Chicago, IL
DIRECTOR
Began serving: March 1999

 

Principal Occupation: President, Barbara J. Pope, P.C., (financial consulting firm); President, Sedgwick Street Fund LLC; which is the general partner of a private investment partnership.

OFFICERS

 

 

Name
Age
Address
Positions Held with Corporation

    

Principal Occupation(s) and Previous Positions

John M. Blaser
Age: 45
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
PRESIDENT

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.

Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.

John D. Boritzke
Age: 46
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

William A. Frazier
Age: 47
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

Brooke J. Billick
Age: 48
M&I Trust
1000 Water Street
Milwaukee, WI
SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.
Previous Positions: Shareholder, Gibbs, Roper, Loots & Williams, SC.

Lori K. Hoch
Age: 31
M&I Trust
1000 Water Street
Milwaukee, WI
ASSISTANT SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.
Previous Positions: Associate, Michael, Best & Friedrich LLP; Associate, Quarles & Brady LLP.

Joseph P. Bree
Age: 29
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
TREASURER

 

Principal Occupations: Investment Officer and Senior Financial Analyst, M&I Investment Management Corp.
Previous Positions: Associate, Barclays Global Investors; Associate, Strong Capital Management.

 

Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and
are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. Investment in
mutual funds involves investment risk, including the possible loss of principal.

This report is authorized for distribution to prospective investors only when preceded
or accompanied by the Funds' prospectus, which contains facts concerning each
Fund's objective and policies, management fees, expenses, and other information.

 

[Logo of Marshall Funds]

Marshall Investor Services
PO Box 1348
Milwaukee, Wisconsin 53201-1348

800-236-FUND(3863)

TDD: Speech and Hearing Impaired Services
800-209-3520
www.marshallfunds.com

Edgewood Services, Inc., Distributor 25800 (10/02)
M&I Investment Management Corp., Investment Adviser

©2002 Marshall Funds, Inc.

 

[Logo of Marshall Funds]

The Marshall Funds Family

Annual Report

The Advisor Class of Shares
(Class A)
  • Marshall Equity Income Fund
  • Marshall Large-Cap Growth & Income Fund
  • Marshall Mid-Cap Value Fund
  • Marshall Mid-Cap Growth Fund
  • Marshall Small-Cap Growth Fund
  • Marshall International Stock Fund
  • Marshall Government Income Fund
  • Marshall Intermediate Bond Fund
  • Marshall Short-Term Income Fund
  • Marshall Money Market Fund

AUGUST 31, 2002

Table of Contents

President's Message     1
Commentaries    
Marshall Equity Income Fund   2
Marshall Large-Cap Growth & Income Fund   4
Marshall Mid-Cap Value Fund   6
Marshall Mid-Cap Growth Fund   8
Marshall Small-Cap Growth Fund   10
Marshall International Stock Fund   12
Marshall Government Income Fund   14
Marshall Intermediate Bond Fund   16
Marshall Short-Term Income Fund   18
Marshall Money Market Fund   20
Financial Information    
Portfolio of Investments   21
Marshall Equity Income Fund   21
Marshall Large-Cap Growth & Income Fund   23
Marshall Mid-Cap Value Fund   25
Marshall Mid-Cap Growth Fund   27
Marshall Small-Cap Growth Fund   29
Marshall International Stock Fund   30
Marshall Government Income Fund   33
Marshall Intermediate Bond Fund   35
Marshall Short-Term Income Fund   38
Marshall Money Market Fund   40
Statements of Assets and Liabilities   46
Statements of Operations   48
Statements of Changes in Net Assets   50
Statement of Cash Flows   54
Financial Highlights   56
Notes to Financial Statements   58
Directors & Officers   73

[Logo of Marshall Funds]

Dear Marshall Funds Shareholder:

Like a deer caught in headlights, uncertain whether to move forward or backward, run or jump (or simply stay perfectly still as on-coming traffic approaches), many investors are having an uneasy feeling as they open their recent investment account statements...if they open them at all. If you feel that way, we suggest now is actually the time for action.

When you began saving and investing, we expect that you had a plan developed either on your own or with a trusted financial adviser. A good investment plan is continuous and incorporates your current financial goals, time horizon, willingness to accept risk of loss, and an execution strategy.

Now is always the best time to re-evaluate your investment plan for adequate diversification, regardless of the direction of the markets. Our prior letters to shareholders have repeated that message:

  • 1999 -- "U.S. investors continue to enjoy one of the strongest economic periods on record...We encourage you to evaluate your investments to ensure your portfolio is well diversified and consistent with your long-term goals."
  • 2000 -- "The message for our shareholders remains consistent: Diversification through broad asset allocation may be the primary success factor in reaching your financial goals."
  • 2001 -- "Every investor who has committed to a broadly diversified investment program, including attention to large, mid and small cap stocks; growth and value investment styles; equities and fixed income securities; and domestic and international equities has been rewarded with competitive returns with less volatility."

This year, we decided that a picture might convey the message more effectively. To make our point, we focus on our own fund family. We present three hypothetical $100,000 portfolios from September 1, 1997 to August 31, 2002, consisting of the Mid-Cap Growth Fund alone as the most volatile portfolio, the Money Market Fund alone as the least volatile portfolio, and an evenly divided portfolio of the entire eleven fund Marshall Fund family. We calculated total return performance with the reinvestment of dividends and capital gains and without any sales charges.

While past performance is not indicative of future results, we hope the benefits of diversification are clearly evident in the portfolio of the entire Marshall Fund family. A fully diversified portfolio allows you to participate in the expected long-term benefits of the market with less volatility. The exact mix of investments should be determined by your personal plan, but regardless of the approach that you take, remember to continue saving, continue investing, and continue diversifying.

As always, thank you for your investment in the Marshall Funds.

Sincerely,

/s/ John M. Blaser

John M. Blaser
President

 

Annual Report -- Commentary

David J. Abitz, CFA

Marshall Equity Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (18.17)%.* In comparison, the Lipper Equity Income Funds Index (LEIFI) returned (13.47)%, while the Standard & Poor's 500 Index (S&P 500) returned (17.99)%.**

Factors Affecting Performance

Over the past year, the Fund outperformed the LEIFI as well as the S&P 500. The Fund's focus on defensive sectors that pay attractive dividends leads us to stocks in groups like consumer staples that are less affected by the economic cycle. In addition, our process identified regional banks and insurance stocks, which outperformed the market as a whole. Regional banks were able to take advantage of the wide spread between lending rates and cost of funds without the risk exposure of money center banks. Insurance companies benefited from firmer pricing due to increased risk after the September 11 terrorist attacks, as well as their large bond portfolios, which have significantly outperformed stocks. Finally, the Fund benefited from a significant underweight in technology stocks, since the Fund's strategy is to own shares of companies that pay above-average dividends.

Telecommunications services continued to lag the market, as the industry struggled to work down overcapacity. In addition, utilities performed poorly, as investors, concerned about Enron's sudden bankruptcy, scrutinized companies for their energy trading practices. Finally, healthcare stocks, particularly pharmaceuticals, posted poor results due to patent expirations and delays in FDA approvals. However, we see significant value in this group at current price levels.

Looking Ahead

Given the difficult market environment of the past two years, we believe that investors have more realistic expectations for company fundamentals and stock prices than they did in the late 1990s. This more rational perspective on investing has driven investors to more traditional approaches such as value investing, which has shown increased relevance in today's market environment. This conservative focus favors our equity income discipline, since a portion of total return comes in the form of dividend income that is earned regardless of market fluctuations. Dividend income is not subject to investor emotions, market cycles, or other biases of the environment. The dividend, which represents a more reliable portion of the Fund's total return, provides a relatively stable component to total return. We continue to feel confident in our quantitatively driven approach, which is to provide investors with reduced low risk yet competitive long-term equity returns.

•Marshall Equity Income Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The S&P 500 and the LEIFI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

 

Annual Report -- Commentary

William J. O'Connor, CFA

Marshall Large-Cap Growth & Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (27.38)%.* In comparison, the Lipper Large-Cap Core Fund Index (LLCCFI) returned (16.63)%, while the Standard & Poor's 500 Index (S&P 500) returned (17.99)%.**

Factors Affecting Performance

A number of factors impacted the Fund's performance during the fiscal year. True to its discipline, the Fund concentrates its efforts on the largest 200 stocks in the S&P 500, and the largest stocks in the index performed, on average, much worse than the smallest 300 companies. Second, while the Fund is a blend of the two investment styles, value clearly outperformed growth stocks, and we were better positioned for an earlier economic recovery.

Another factor adversely affecting the Fund was our concern for the consumer after the September 11 terrorist attacks, resulting in an underweight of the retailing sector. In fact, retailing and other consumer discretionary stocks performed relatively well.

We underestimated the positive impact of lower oil prices, a tax cut and mortgage refinancing proceeds on consumer spending. Indeed, the Fund's holdings in Wal-Mart Stores, Inc. (2.51% of net assets), Lowe's Cos., Inc. (1.42% of net assets) and Kohls Corp. (2.55% of net assets) performed well. However, the Fund's investments in the more economically sensitive sectors such as advertising, brokerage and technology were not rewarded. The pace of the economic recovery was much slower than we expected, despite the fact that the economy was emerging from one of the worst-ever corporate profit declines. Finally, the Fund's investment in Tyco International Ltd. significantly hurt performance, as revelations involving alleged management wrongdoing severely punished the stock.

Looking Ahead

Investors are paying a historically high valuation premium versus the market overall for the predictable earnings found in most defensive sectors, such as foods, cosmetics and defense companies. As such, the Fund remains under exposed to these sectors. We maintain our emphasis on cyclical companies in the portfolio, which has moderated the performance on the Fund over the past year. Emerging from one of the worst earnings declines in 50 years, the pace of earnings recovery has certainly been disappointing. We feel more investment opportunities exist in high quality companies, selling at reasonable valuations with cyclical exposure.

•Marshall Large-Cap Growth & Income Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The S&P 500 and the LLCCFI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper Inc. as falling into the respective categories indicated.

 

Annual Report -- Commentary

Matthew B. Fahey

Marshall Mid-Cap Value Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (9.78)%.* In comparison, the Russell Mid-Cap Value Index (RMCVI) returned (4.87)% and the Lipper Mid-Cap Value Funds Index (LMCVFI) returned (9.38)%, while the Standard & Poor's Mid-Cap 400 Index (S&P 400) returned (9.23)%.**

Factors Affecting Performance

The Fund's outperformance of its benchmarks this past year had little to do with betting on specific sectors or industries. Instead, the Fund outperformed because of stock selection through its bottom up analysis focusing on investments irrespective of economic or political climate. The stocks that improved during the past year included a very diverse collection of companies that shared one primary attribute: investors had low expectations for improved performance. Yet, many of the holdings did have improved fundamentals, which drove the stock prices higher.

Despite the difficult overall market, the Fund invested in three stocks that increased more than 50% in value during the fiscal year -- Newell Rubbermaid, Inc. (1.64% of net assets), Boston Scientific Corp. (1.02% of net assets) and Northrop Grumman Corp. (1.53% of net assets). In the case of Newell Rubbermaid, Inc., new management boosted operating margins by refocusing the company on its core businesses and growing revenue. Meanwhile, Boston Scientific Corp., a medical device company, increased its profitability and pipeline with its internally developed coronary stent platform and drug eluting stent trials. Whereas Newell Rubbermaid Inc. and Boston Scientific Corp. are both turnaround stories being fixed internally, Northrop Grumman Corp. shares benefited from a macroeconomic factor: the war on terrorism.

The Fund's performance was still modestly negative -- although much less so than the overall stock market. For example, Keane, Inc. (1.34% of net assets), an information technology consulting firm, fell 52% because the demand for its services declined dramatically. Kroger Co., Inc. (2.03% of net assets) declined 32% primarily because the pricing environment in the supermarket industry has become very intense.

Looking Ahead

Our continuing strategy is to look for strong companies that have temporarily fallen out of favor with investors. We must then become convinced of two factors: that the company can overcome its current problems and will remain only temporarily out of favor; and that the company is financially strong enough through its balance sheet and cash flow to support the business until it is eventually repaired. That's one reason why we continue to hold Keane, Inc., which is a company with excellent management and a strong balance sheet that has the wherewithal to survive the downturn in technology spending. We also see a turnaround emerging at Bausch & Lomb, Inc. (2.28% of net assets). The eye care company has hired new management to improve operating margins. In addition, we believe the depressed shares of steel-maker Nucor Corp. (1.75% of net assets) will benefit from an improving economy.

•Marshall Mid-Cap Value Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The RMCVI, the LMCVFI and the S&P 400 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The RMCVI measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective category indicated. The S&P 400 is a capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. The Fund has elected to change the benchmark index from the S&P 400 to the RMCVI. The RMCVI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

 

Annual Report -- Commentary

Michael D. Groblewski, CFA

Marshall Mid-Cap Growth Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (35.93)%.* In comparison, the Russell Mid-Cap Growth Index (RMCGI) returned (23.38)% and the Lipper Mid-Cap Growth Funds Index (LMCGFI) returned (25.70)%, while the Standard & Poor's Mid-Cap 400 Index (S&P 400) returned (9.23)%.**

Factors Affecting Performance

The past year was a challenge for our nation and equity markets alike. Terrorist attacks of September 11, recession, corporate scandals, and the threat of war consumed the thoughts and actions of America. These events affected each of our lives in varying degrees, and fueled the worst bear market in more than 70 years. During this time, growth investors have been particularly challenged. As market forces took apart virtually every stock, portfolios similar to the Fund were hurt more than average. We were particularly hurt by our holding in cable and healthcare in an attempt to invest in companies with a stable outlook and pricing power.

As anxiety ruled the market, we continued to search for companies with solid business models, above-average growth prospects, and the balance sheets necessary for these companies to survive and ultimately thrive. One bright spot during the past year was our holding in PetSmart, Inc. As America stayed closer to home, PetSmart, Inc., a specialty pet retailer, remodeled stores and freshened up its product and service offerings. The result was a jump in same store sales, increased margins, and renewed interest in the company's shares. We eventually sold our position after the stock more than doubled to reach our price target.

Everyday we continue to wade through a volatile market in search of our next PetSmart, Inc. Market softness has given us the opportunity to accumulate positions in industry leaders such as AdvancePCS (1.65% of net assets), PartnerRe Ltd., (3.28% of net assets) Radio One, Inc. (2.03% of net assets) and Stage Stores, Inc. (3.54% of net assets). We believe each have excellent growth prospects and have the potential to generate significant cash flow.

Looking Ahead

We remain optimistic on the economic recovery against a backdrop of low interest rates, historically low unemployment levels, and a consumer that refuses to quit spending. Therefore, we have a significant portion of the Fund in economically sensitive stocks, with the largest component in consumer discretionary names. Additionally, we own names that should benefit from the very issues that continue to hinder the pace of economic growth. These include energy and insurance stocks, which are both experiencing strong price increases. Therefore, we believe, regardless of the pace of the economic recovery, we are positioning the Fund in above-average growth opportunities at reasonable prices.

•Marshall Mid-Cap Growth Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The RMCGI, the LMCGFI and the S&P 400 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The RMCGI measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. The Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated. The S&P 400 is a capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. The Fund has elected to change the benchmark index from the S&P 400 to the RMCGI. The RMCGI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

 

Annual Report -- Commentary

Sean A. McLeod, CFA

Marshall Small-Cap Growth Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (31.42)%.** In comparison, the Russell 2000 Growth Index (Russell 2000 GI) returned (26.02)% and the Lipper Small-Cap Growth Funds Index (LSCGI) returned (24.37)%, while the Russell 2000 Index (Russell 2000) returned (15.44)%.***

Factors Affecting Performance

The past twelve months have been difficult, particularly for growth stocks. Investors traditionally have paid for growth stocks in terms of a multiple of the company's earnings or cash flow. Unfortunately, investors have had to deal with terrorism, recession, corporate malfeasance, and the threat of war. As a result, not only have earnings declined due to the recession, but the "multiple" investors are willing to pay has declined. In essence, investors have increased their "risk premium" for the foreseeable future, which lowers the amount they are willing to pay for a growth stock. We expect economic growth to improve along with earnings, but investor confidence remains key to an improving market environment.

Looking Ahead

The portfolio is positioned to take advantage of an improving business environment. We are overweight in economically sensitive sectors such as consumer cyclicals, energy and technology, while underweight in defensive sectors such as consumer staples and financials. As an example, we have been increasing our exposure to the teen retailers. Not only do we like the demographics--the teen population is growing faster than the overall population and has increasing disposable incomes, at current valuations, the stocks are pricing in a long-lasting recession, providing an attractive entry point. Energy is another area of focus, as the sector should benefit from a lack of new supply of natural gas, which should result in higher equilibrium prices, to the benefit of energy producers.

We continue to invest in sectors benefiting from attractive secular trends, and in companies with lasting competitive advantages, strong balance sheets, and good management teams. We feel that this approach will result in outperformance over the business cycle.

•Marshall Small-Cap Growth Fund

 

* Small company stocks may be less liquid and subject to greater volatility than large capitalization stocks.

** Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

*** The Russell 2000 GI, the LSCGI and the Russell 2000 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The Russell 2000 GI measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. Lipper indexes are an average of the total return of 30 largest mutual funds designated by Lipper Inc., as falling into the respective categories indicated. The Russell 2000 is an index of common stocks whose market capitalizations generally range from $200 million to $5 billion. The Fund has elected to change the benchmark index from the Russell 2000 to the Russell 2000 GI. The Russell 2000 GI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

 

Annual Report -- Commentary

Daniel R. Jaworski, CFA

Marshall International Stock Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (18.28)%.** In comparison, the Lipper International Funds Index (LIFI) returned (12.50)%, while the Morgan Stanley Capital International Europe, Australasia and Far East Index (EAFE) returned (14.95)%.***

Factors Affecting Performance

International markets fared no better than the U.S. stock market, as economic growth remained sluggish throughout Europe and Japan. The decline in equities was broad on both a geographic and industrial basis. Of the 21 developed countries included in the Fund's benchmark, the EAFE, only two generated positive equity market returns over the last 12 months. Also, all 10 of the major industrial sectors generated negative returns for the reporting period. While emerging markets in Asia showed signs of life during part of the reporting period, most of those gains evaporated as the fiscal year came to a close. However, U.S. investors in overseas markets benefited from a weakened dollar, as foreign currencies translated into more dollars by the end of the reporting period.

Compared to the EAFE, the Fund benefited from better stock selection in the technology and telecommunications sectors, avoiding some of the worst performing companies in the index. Indeed, one of the Fund's best performers was Telecom Italia SpA (1.24% of net assets), which has relatively low debt and strong earnings. In addition, the Fund owned shares of Samsung Electronics Co. (1.96% of net assets), a stock that nearly doubled during the year on the strength of strong earnings momentum. Since Samsung Electronics Co. is based in South Korea and thus is part of emerging markets, it is not included in the EAFE. As of August 31, 2002, emerging market companies accounted for about 13% of the Fund's holdings.†

Another relatively good area for the Fund was the consumer sector, with such winning stocks as Hyundai Motor Co., Ltd. (0.89% of net assets) generating a strong contribution to total return. A low interest rate environment certainly benefited Hyundai Motor Co., Ltd., as well as its increasing market share and reputation for quality automobiles at reasonable prices. In financial services, Bank of Ireland (1.99% of net assets) continues to generate excellent returns, boosted by a relatively healthy Irish economy and a scarcity of competitors.

Looking Ahead

We continue to search for companies that are likely to benefit from an economic pickup, including banks and highly focused industrial companies. While we have not invested heavily in pharmaceuticals due to concerns about competition from generic drugs and delayed FDA approvals, these stocks have declined in price to the point where they appear attractive. In technology, we are still concerned about overcapacity and weak demand.

In terms of geographical allocation, we remain cautious on Japan, focusing our exposure in a few companies such as Nissan Motors Co., Ltd. (2.57% of net assets) and Sega Enterprises (2.26% of net assets) that have demonstrated a concern for shareholder value. In Europe, while economic growth remains slower than expected, we are increasing our holdings in industrial sectors where there has been consolidation, buying stocks with strong returns on capital and modest price/earnings multiples. Meanwhile, emerging markets continue to provide the best opportunity for economic growth, especially with companies that meet our investment criteria of reasonably priced, worldwide industry leaders.

•Marshall International Stock Fund

Annual Report -- Commentary

 

Jason D. Weiner, CFA

Marshall Government Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 2.11%.* In comparison, the Lipper U.S. Mortgage Funds Index (LUSMI) returned 7.57%, while the Lehman Brothers Mortgage-Backed Securities Index (LMI) returned 8.20%.**

Factors Affecting Performance

Interest rates declined significantly as investors sought refuge in Treasury securities during a rather tumultuous fiscal year. This flight to quality was precipitated by the horrible September 11 attacks. In response, the Federal Reserve Board continued to aggressively reduce short-term interest rates to the lowest level in 40 years. As the year progressed, investors faced episodes of corporate malfeasance at large corporations. At the same time, continued geopolitical dangers and threats of terrorism unnerved investors. This difficult environment caused investors to favor the relative safety of Treasury securities, while they questioned the state of the U.S economic recovery. This tremendous demand for Treasuries pushed yields to historically low levels. Therefore, bond investors were rewarded with solid returns during the last 12 months.

The historically low interest rate environment combined with an exceptionally strong housing market has increased the probability of a major refinancing boom. As a result, prepayment fears have pervaded the mortgage market, which caused these securities to lag the strong performance of U.S Treasuries. Our emphasis on call-protected securities such as Treasury and Agency debentures added significantly to portfolio performance.

Looking Ahead

Over the next few months, we expect to observe prepayment speeds that exceed the market consensus. This will dampen mortgage performance relative to other call-protected sectors of the bond market such as Treasury and Agency securities. We will continue to underweight mortgage product with the anticipation of a substantial increase in prepayment risk. Therefore, we favor Treasuries, agency debentures, and highly seasoned mortgage product, allowing the Fund to benefit more directly from declining interest rates.

We believe the economy will eventually recover in 2003, resulting in a rate environment more supportive of mortgage securities' valuations. We will look to opportunistically add to our mortgage position once this refinancing activity subsides and there are clear signs of an economic recovery. In the near term, we remain cautious about the geopolitical landscape and the condition of the economy. Potential terrorism, corporate governance, and the threat of war in Iraq continue to encourage a conservative portfolio approach. Hopefully, these concerns will fade from public sentiment, but it will take time.

•Marshall Government Income Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The LMI and the LUSMI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The LMI is an index comprised of fixed rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corp. (FHLMC) and the Federal National Mortgage Association (FNMA). Lipper indexes are an average of the total returns of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

 

Annual Report -- Commentary

Jason D. Weiner, CFA

Marshall Intermediate Bond Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (0.46)%.* In comparison, the Lipper Short/Intermediate Investment Grade Bond Funds Index (LSIBF) returned 5.34%, while the Lehman Brothers Government/Credit Intermediate Index (LGCI) returned 7.74%.**

Factors Affecting Performance

Fixed income investors achieved strong portfolio returns as interest rates fell precipitously over the last 12 months. The Federal Reserve Board aggressively reduced short-term interest rates to historically low levels in the wake of the September 11 attacks. The rather pronounced decline in interest rates across the yield curve was caused by a significant flight to quality. Investors favored the relative safety of U.S. Treasuries due to heightened concerns over corporate malfeasance, potential terrorism, geopolitical conflicts and signs of a sputtering economy. This challenging environment caused investors to demand higher risk premiums for both equity investments and corporate credit.

Although most sectors of the bond market produced solid returns during our fiscal year, corporate bond investors faced a very difficult market. The corporate bond market became bifurcated as certain industries' corporate debt maintained its value while other industries' debt remained under severe pressure. The rapid decline in credit quality among companies in the utility, telecommunications, and cable/media sectors highlight the pitfalls that await over-leveraged companies that fail to grow in a lower inflationary world. Generally, we were able to perform in line with our competitors due to a high quality, well-diversified approach to the corporate market. Additionally, sound security selection supported by thorough credit analysis and adept sector allocation resulted in additional total return for the Fund.

Looking Ahead

We expect the economy will rebound in 2003, supporting corporate and mortgage bond valuations. We especially believe corporate bonds offer compelling return potential, but today's arduous market conditions warrant a cautious approach. We will look to opportunistically add to our corporate bond allocation when the economy appears to be in a sustainable recovery. In the near term, prudence is warranted given the looming geopolitical dangers, corporate governance issues, and the threat of war with Iraq. This type of environment requires a disciplined, well-diversified portfolio approach focusing on high quality sectors such as mortgage-backed, asset-backed, and agency securities to complement our high quality corporate bond allocation. The negative sentiment that has pervaded the financial markets will show signs of abatement, but this will take time.

•Marshall Intermediate Bond Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The LGCI and the LSIBF are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The LGCI is an index comprised of government and corporate bonds rated BBB or higher with maturities between 1-10 years. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

 

Annual Report -- Commentary

Richard M. Rokus, CFA

Marshall Short-Term Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 1.51%.* In comparison, the Lipper Short-Term Investment Grade Bond Fund Index (LSTIBI) returned 3.69%, while the Merrill Lynch 1-3 Year U.S. Government/Corporate Index (ML13) returned 6.48%.**

Factors Affecting Performance

Because the Fund invests primarily in fixed income securities with maturities ranging from three months to two years, it has benefited from a decline in short-term interest rates during the fiscal year. During that time period, the Federal Reserve Board (the "Fed") cut the federal funds target rate, the amount charged to member banks for overnight loans, from 3.5% to 1.75%.

In early 2002, the investment community generally believed that the Fed would have to increase interest rates in response to a strong economic recovery that appeared to be taking place. As a result, the yield on the two-year Treasury note rose to 3.7% in late March. However, the recovery lost steam, and the yield on the two-year note fell to 2.1% by the end of the reporting period.

In the case of Treasury securities, declining interest rates translates into higher bond prices. However, the effect on mortgage-backed securities was not quite as beneficial, since investors became concerned about refinancing, which homeowners were quick to do when rates declined.

Another major trend during the reporting period involved the corporate bond market, which suffered declines due to the weaker-than-expected economy as well as highly publicized accounting scandals. Indeed, the primary reason why the Fund lagged the ML13 is that the index contains no corporate bonds. Corporate bonds are still attractive, primarily because of their higher yields. However, the Fund has increased the diversification of its corporate holdings to reduce the credit risk of an individual holding.

Looking Ahead

Because interest rates are likely to decline further, our strategy is to limit our purchase of mortgage-backed securities. Likewise, because the corporate bond market is in a state of flux due to the weakened economy and questions of management integrity, we are cautious in that sector, carefully focusing on high quality issues. Perhaps the most attractive category is the government agency market, which can continue to benefit from declining interest rates without concerns over credit or refinancing risk.

•Marshall Short-Term Income Fund

* Past performance is no guarantee of future results. The line graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns quoted reflect all applicable sales charges.

** The ML13 and the LSTIBI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The ML13 is an index tracking short-term U.S. government and corporate securities with maturities between 1 and 2.99 years. The index is produced by Merrill Lynch Pierce Fenner & Smith. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rats. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

 

Annual Report -- Commentary

Richard M. Rokus, CFA

Marshall Money Market Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 1.69%.* In comparison, the Lipper Money Market Funds Index (LMMFI) returned 1.74%, while iMoneyNet, Inc. Money Fund Report AveragesTM (MFRA) returned 1.67%.** As of August 31, 2002, the Fund's 7-day net yield was 1.20%.***

Factors Affecting Performance

Within weeks after the September 11 terrorist attacks, the Federal Reserve Board (the "Fed") cut the federal funds target rate, the amount charged to member banks for overnight loans, from 3.5% to 1.75% where it has remained through the end of the fiscal year. The Fed's attempt to boost economic growth by lowering rates has had limited success. Although the economy, as measured by the Gross Domestic Product, appeared to emerge from recession in late 2001 and early 2002, there was concern that the Fed's actions were wearing off and that a "double dip" recession could take place.

The Fund's superior total return partly reflects the purchase of high quality one-year securities when interest rates were higher. In addition, the Fund has generally avoided the commercial paper of companies that have received unfavorable news coverage.

Another factor has reduced the appeal of commercial paper: scarcity. With interest rates low, the supply of commercial paper, typically with maturities of 30 to 365 days, has become sparse, as a number of major issuers have elected to issue debt with maturities beyond one year.

Looking Ahead

Because of the weak economy, it is likely that interest rates will remain at low levels for the next several months. At the same time, the Fed would not likely reduce short-term rates since 1.75% is already the lowest level in 40 years. Moreover, the Fed does not want to find itself in the position of the Japanese central bank, in which interest rates were virtually lowered to zero without much influence on economic growth.

Because interest rates are so low, part of the Fund's strategy is to add floating rate securities in which yields reset frequently. Partly because the expectation is that the Fed is likely to stand put, the extra yield offered by 90-day commercial paper over the federal funds target rate is virtually zero. The Fund will add longer-term securities when yields become more attractive. How soon that happens may depend on the long-awaited recovery picking up steam.

* Past performance is no guarantee of future results. Yields may vary. Yields quoted for money market funds most closely reflect the Fund's current earnings.

** Money Fund ReportTM, a service of iMoney Net, Inc. (formerly IBC Financial Data) publishes annualized yields of hundreds of money market funds on a weekly basis, and through its Money Market Insight publication reports monthly and year-to-date investment results for the same money funds. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated. They do not reflect sales charges.

*** The 7-day net annualized yield is based on the average net income per share for the 7 days ended on the date of calculation and the offering price on that date. The 7-day effective yield is annualized and reflect daily compounding of the 7-day net yield.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Portfolio of Investments

Equity Income Fund

 

 

Description

   

Shares

   

Value

Common Stocks -- 95.8%

 

 

 

 

 

 

Consumer Discretionary -- 4.1%

 

 

 

 

 

 

Advertising -- 0.4%

 

 

 

 

 

 

 

Interpublic Group of Cos., Inc.

 

 

65,000

 

$

1,184,950

 

Auto Parts & Equipment -- 0.4%

 

 

 

 

 

 

Delphi Corp.

 

 

94,200

 

 

918,450

 

Johnson Controls, Inc.

 

 

7,100

 

 

612,659

 

 

 

 

 

 

 

1,531,109

 

Automobile Manufacturers -- 0.9%

 

 

 

 

Ford Motor Co.

 

 

65,554

 

 

771,571

 

General Motors Corp.

 

 

47,100

 

 

2,254,206

 

 

 

 

 

 

 

3,025,777

 

Department Stores -- 1.0%

 

 

 

 

 

 

 

May Department Stores Co.

 

 

36,700

 

 

1,076,411

 

Sears, Roebuck & Co.

 

 

52,700

 

 

2,398,377

 

 

 

 

 

 

 

3,474,788

 

Hotels -- 0.5%

 

 

 

 

 

 

 

Carnival Corp.

 

 

64,800

 

 

1,585,656

 

Household Appliances -- 0.5%

 

 

 

 

 

 

 

Maytag Corp.

 

 

53,000

 

 

1,729,920

 

Photographic Products -- 0.2%

 

 

 

 

 

 

 

Eastman Kodak Co.

 

 

23,500

 

 

717,690

 

Publishing -- 0.2%

 

 

 

 

 

 

 

McGraw-Hill Cos., Inc.

 

 

11,000

 

 

697,510

 

Total Consumer Discretionary

 

 

 

 

 

13,947,400

Consumer Staples -- 9.9%

 

 

 

 

 

 

 

Food Distributors -- 0.3%

 

 

 

 

 

 

 

SUPERVALU, Inc.

 

 

44,600

 

 

926,342

 

Household Products -- 4.3%

 

 

 

 

 

 

 

Clorox Co.

 

 

37,500

 

 

1,614,750

 

Kimberly-Clark Corp.

 

 

56,300

 

 

3,368,992

 

Procter & Gamble Co.

 

 

110,600

 

 

9,804,690

 

 

 

 

 

 

 

14,788,432

 

Packaged Foods -- 1.8%

 

 

 

 

 

 

 

Campbell Soup Co.

 

 

65,400

 

 

1,514,010

 

General Mills, Inc.

 

 

17,700

 

 

744,993

 

Heinz (H.J.) Co.

 

 

50,600

 

 

1,911,162

 

Sara Lee Corp.

 

 

112,000

 

 

2,065,280

 

 

 

 

 

 

 

6,235,445

 

Personal Products -- 0.6%

 

 

 

 

 

 

 

Gillette Co.

 

 

63,800

 

 

2,011,614

 

Retail-Foods -- 0.3%

 

 

 

 

 

 

 

Albertson's, Inc.

 

 

37,500

 

 

964,500

 

Tobacco -- 2.6%

 

 

 

 

 

 

 

Philip Morris Cos., Inc.

 

 

179,500

 

 

8,975,000

 

Total Consumer Staples

 

 

 

 

 

33,901,333

Energy -- 9.1%

 

 

 

 

 

 

 

Oil & Gas Equipment/
Services -- 0.5%

 

 

 

 

 

 

 

Schlumberger Ltd.

 

 

36,800

 

 

1,590,128

 

Oil & Gas Exploration/
Production -- 0.1%

 

 

 

 

 

 

 

Conoco, Inc.

 

 

20,300

 

 

498,365

 

Oil & Gas Integrated -- 7.8%

 

 

 

 

 

 

 

ChevronTexaco Corp.

 

 

85,934

 

 

6,585,122

 

Exxon Mobil Corp.

 

 

446,152

 

 

15,816,088

 

(1)Occidental Petroleum Corp.

 

 

62,100

 

 

1,844,370

 

Phillips Petroleum Co.

 

 

45,600

 

 

2,397,648

 

 

 

 

 

 

 

26,643,228

 

Refining/Marketing -- 0.7%

 

 

 

 

 

 

 

Ashland, Inc.

 

 

38,000

 

 

1,089,080

 

Sunoco, Inc.

 

 

39,500

 

 

1,401,460

 

 

 

 

 

 

 

2,490,540

 

Total Energy

 

 

 

 

 

31,222,261

Financials -- 26.9%

 

 

 

 

 

 

 

Banks -- 13.5%

 

 

 

 

 

 

 

Bank of America Corp.

 

 

128,600

 

 

9,012,288

 

Bank of New York Co., Inc.

 

 

78,800

 

 

2,769,820

 

Bank One Corp.

 

 

77,400

 

 

3,169,530

 

BB&T Corp.

 

 

24,300

 

 

924,615

 

Comerica, Inc.

 

 

26,300

 

 

1,538,550

 

Fleet Boston Financial Corp.

 

 

95,820

 

 

2,312,137

 

Mellon Financial Corp.

 

 

49,100

 

 

1,357,615

 

National City Corp.

 

 

74,900

 

 

2,334,633

 

PNC Financial Services Group, Inc.

 

 

40,000

 

 

1,843,600

 

Regions Financial Corp.

 

 

31,400

 

 

1,121,608

 

SouthTrust Corp.

 

 

27,300

 

 

716,352

 

SunTrust Banks, Inc.

 

 

34,000

 

 

2,295,340

 

Synovus Financial Corp.

 

 

43,300

 

 

1,046,561

 

U.S. Bancorp

 

 

123,500

 

 

2,654,015

 

Wachovia Corp.

 

 

80,800

 

 

2,977,480

 

Washington Mutual, Inc.

 

 

86,300

 

 

3,263,003

 

Wells Fargo & Co.

 

 

132,700

 

 

6,925,613

 

 

 

 

 

 

 

46,262,760

 

Consumer Finance -- 0.3%

 

 

 

 

 

 

 

Household International, Inc.

 

 

27,800

 

 

1,003,858

 

Diversified Financial
Services -- 9.0%

 

Citigroup, Inc.

 

 

416,238

 

 

13,631,795

 

Fannie Mae

 

 

76,000

 

 

5,759,280

 

J.P. Morgan & Co., Inc.

 

 

160,150

 

 

4,227,960

 

Merrill Lynch & Co., Inc.

 

 

80,700

 

 

2,922,954

 

Morgan Stanley Dean Witter & Co.

 

 

102,800

 

 

4,391,616

 

 

 

 

 

 

 

30,933,605

 

Insurance-Brokers -- 1.0%

 

 

 

 

 

 

 

AON Corp.

 

 

24,800

 

 

490,048

 

Marsh & McLennan Cos., Inc.

 

 

60,800

 

 

2,957,920

 

 

 

 

 

 

 

3,447,968

 

Insurance-Life/Health -- 1.2%

 

 

 

 

 

 

 

Jefferson-Pilot Corp.

 

 

16,200

 

 

682,344

 

Lincoln National Corp.

 

 

50,600

 

 

1,874,730

 

UNUM Provident Corp.

 

 

60,500

 

 

1,401,180

 

 

 

 

 

 

 

3,958,254

 

Insurance-Multi-line -- 0.3%

 

 

 

 

 

 

 

Hartford Financial Services Group, Inc.

 

17,600

 

 

880,352

 

Insurance-Property/Casualty -- 0.9%

 

 

 

 

Ace, Ltd.

 

 

32,400

 

 

1,030,644

 

Allstate Corp.

 

 

57,800

 

 

2,151,316

 

 

 

 

 

 

 

3,181,960

 

Real Estate Investment Trust -- 0.7%

 

Equity Office Properties Trust

 

 

88,500

 

 

2,467,380

 

Total Financials

 

 

 

 

 

92,136,137

Healthcare -- 17.5%

 

 

 

 

 

 

 

Pharmaceuticals -- 17.5%

 

 

 

 

 

 

 

Abbott Laboratories

 

 

97,450

 

 

3,900,923

 

Bristol-Myers Squibb Co.

 

 

262,600

 

 

6,551,870

 

Johnson & Johnson

 

 

175,700

 

 

9,542,267

 

Lilly (Eli) & Co.

 

 

99,150

 

 

5,755,657

 

Merck & Co., Inc.

 

 

197,200

 

 

9,962,544

 

Pfizer, Inc.

 

 

383,900

 

 

12,699,412

 

Pharmacia Corp.

 

 

88,400

 

 

3,863,080

 

Schering Plough Corp.

 

 

135,700

 

 

3,131,956

 

Wyeth

 

 

107,700

 

 

4,609,560

 

Total Healthcare

 

 

 

 

 

60,017,269

Industrials -- 12.6%

 

 

 

 

 

 

 

Aerospace/Defense -- 2.5%

 

 

 

 

 

 

 

Boeing Co.

 

 

74,400

 

 

2,758,008

 

Goodrich Corp.

 

 

48,300

 

 

1,008,021

 

Honeywell International, Inc.

 

 

79,200

 

 

2,372,040

 

United Technologies Corp.

 

 

40,600

 

 

2,411,234

 

 

 

 

 

 

 

8,549,303

 

Air Freight & Logistics -- 0.2%

 

 

 

 

 

 

 

Ryder Systems, Inc.

 

 

28,400

 

 

742,376

 

Commercial Printing -- 0.3%

 

 

 

 

 

 

 

Donnelley (R.R.) & Sons Co.

 

 

34,500

 

 

910,110

 

Construction & Engineering Services -- 0.3%

 

 

 

 

 

 

 

Fluor Corp.

 

 

38,500

 

 

1,064,910

 

Electrical Components -- 1.3%

 

 

 

 

 

 

 

(1)Cooper Industries, Inc.

 

 

32,900

 

 

1,076,488

 

Emerson Electric Co.

 

 

51,100

 

 

2,492,658

 

Rockwell Automation, Inc.

 

 

40,500

 

 

746,010

 

 

 

 

 

 

 

4,315,156

 

Industrial Conglomerates -- 6.3%

 

 

 

 

 

 

(1)3M Co.

 

 

28,400

 

 

3,548,580

 

General Electric Co.

 

 

597,000

 

 

17,999,550

 

 

 

 

 

 

 

21,548,130

 

Machinery Construction/
Farm -- 0.2%

 

 

 

 

Caterpillar, Inc.

 

 

13,200

 

 

576,048

 

Machinery Industrial -- 0.7%

 

 

 

 

 

 

 

Dover Corp.

 

 

28,500

 

 

818,805

 

Eaton Corp.

 

 

15,200

 

 

1,075,248

 

Ingersoll-Rand Co.

 

 

17,700

 

 

664,635

 

 

 

 

 

 

 

2,558,688

 

Railroads -- 0.3%

 

 

 

 

 

 

 

Burlington Northern Santa Fe

 

 

40,300

 

 

1,159,028

 

Services-Office/Supplies -- 0.5%

 

 

 

 

 

Avery Dennison Corp.

 

 

18,900

 

 

1,192,968

 

Pitney Bowes, Inc.

 

 

18,500

 

 

670,625

 

 

 

 

 

 

 

1,863,593

 

Total Industrials

 

 

 

 

 

43,287,342

Information Technology -- 1.0%

 

 

 

 

 

 

 

Computer Hardware -- 1.0%

 

 

 

 

 

 

 

(1)Hewlett-Packard Co.

 

 

242,400

 

 

3,255,432

Materials -- 4.0%

 

 

 

 

 

 

 

Aluminum -- 0.6%

 

 

 

 

 

 

 

Alcoa, Inc.

 

 

89,100

 

 

2,235,519

 

Chemicals Diversified -- 1.9%

 

 

 

 

 

 

 

Dow Chemical Co.

 

 

83,608

 

 

2,526,634

 

Du Pont (E.I.) de Nemours & Co.

 

 

95,700

 

 

3,857,667

 

 

 

 

 

 

 

6,384,301

 

Construction Materials -- 0.2%

 

 

 

 

 

 

 

Vulcan Materials Co.

 

 

20,800

 

 

811,616

 

Industrial Gases -- 0.5%

 

 

 

 

 

 

 

Air Products & Chemicals, Inc.

 

 

34,400

 

 

1,613,704

 

Paper Products -- 0.8%

 

 

 

 

 

 

 

Georgia-Pacific Corp.

 

 

29,900

 

 

629,395

 

International Paper Co.

 

 

28,900

 

 

1,088,085

 

(1)MeadWestvaco Corp.

 

 

44,000

 

 

1,024,760

 

 

 

 

 

 

 

2,742,240

 

Total Materials

 

 

 

 

 

13,787,380

Telecommunications Services -- 6.5%

 

 

 

 

Integrated Telecommunication Services -- 6.5%

 

 

 

 

 

 

 

AT&T Corp.

 

 

245,000

 

 

2,993,900

 

BellSouth Corp.

 

 

138,300

 

 

3,225,156

 

SBC Communications, Inc.

 

 

314,332

 

 

7,776,574

 

Verizon Communications, Inc.

 

 

269,590

 

 

8,357,290

 

Total Telecommunications Services

 

 

 

 

 

22,352,920

Utilities -- 4.2%

 

 

 

 

 

 

 

Electric Utilities -- 2.7%

 

 

 

 

 

 

 

(1)Allegheny Energy, Inc.

 

 

53,200

 

 

1,098,580

 

American Electric Power Co., Inc.

 

19,200

 

 

654,720

 

Cinergy Corp.

 

 

28,400

 

 

976,960

 

FPL Group, Inc.

 

 

28,400

 

 

1,621,072

 

FirstEnergy Corp.

 

 

51,100

 

 

1,686,300

 

Pinnacle West Capital Corp.

 

 

33,400

 

 

1,115,894

 

Reliant Energy, Inc.

 

 

69,000

 

 

817,650

 

TECO Energy, Inc.

 

 

61,400

 

 

1,212,650

 

 

 

 

 

 

 

9,183,826

 

Gas Utilities -- 0.7%

 

 

 

 

 

 

 

El Paso Corp.

 

 

55,000

 

 

930,050

 

(1)KeySpan Corp.

 

 

42,500

 

 

1,489,200

 

 

 

 

 

 

 

2,419,250

 

Multi-Utilities -- 0.8%

 

 

 

 

 

 

 

Duke Energy Corp.

 

 

104,300

 

 

2,798,369

 

Total Utilities

 

 

 

 

 

14,401,445

Total Common Stocks (identified cost $310,142,071)

 

 

 

 

$ 

328,308,919
               
 

 

Description

   

Principal
Amount
or Shares

   

Value

(2)U.S. Treasury -- 0.2%

 

 

 

 

 

 

 

10/10/2002 (identified cost $598,914)

 

$

600,000

 

$

598,988

Total Investments in Securities (identified cost $310,740,985)

 

 

 

 

 

328,907,907

Mutual Funds -- 1.6%

 

 

 

 

 

 

 

(1)iShares Russell 1000 Value Index Fund

 

 

68,000

 

 

3,250,400

 

(1)Utilities Select Sector SPDR Fund

 

 

98,200

 

 

2,111,300

Total Mutual Funds (identified cost $5,303,818)

 

 

 

 

 

 5,361,700

(3)Repurchase Agreement -- 2.4%

 

 

 

 

 

 

Lehman Brothers, Inc., 1.80%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

8,431,477

 

 

8,431,477

Total Investments (identified cost $324,476,280)

 

 

 

 

$

342,701,084

 

 

Large-Cap Growth & Income Fund

 

 

Description

   

   

Shares

   

Value

Common Stocks -- 97.9%

 

 

 

 

 

 

 

Consumer Discretionary -- 13.5%

 

 

 

 

Department Stores -- 2.6%

 

 

 

 

 

 

 

(1)(4)Kohl's Corp.

 

 

102,500

 

$

7,146,300

 

General Merchandise -- 2.5%

 

 

 

 

Wal-Mart Stores, Inc.

 

 

131,430

 

 

7,028,876

 

Movies & Entertainment -- 3.3%

 

 

 

 

(4)AOL Time Warner, Inc.

 

 

261,350

 

 

3,306,078

 

Disney (Walt) Co.

 

 

147,716

 

 

2,316,187

 

(4)Viacom, Inc., Class B

 

 

92,300

 

 

3,756,610

 

 

 

 

 

 

 

9,378,875

 

Restaurants -- 1.3%

 

 

 

 

 

 

 

McDonald's Corp.

 

 

153,800

 

 

3,654,288

 

Retail-Computer & Electronics -- 0.8%

 

 

 

 

 

 

 

(1)RadioShack Corp.

 

 

102,500

 

 

2,233,475

 

Retail-Home Improvement -- 3.0%

 

 

 

 

Home Depot, Inc.

 

 

134,940

 

 

4,443,574

 

(1)Lowe's Cos., Inc.

 

 

96,200

 

 

3,980,756

 

 

 

 

 

 

 

8,424,330

 

Total Consumer Discretionary

 

 

 

 

 

37,866,144

Consumer Staples -- 9.2%

 

 

 

 

 

 

 

Household Products -- 1.2%

 

 

 

 

The Procter & Gamble Co.

 

 

39,430

 

$

3,495,469

 

Personal Products -- 2.2%

 

 

 

 

 

 

 

(1)The Estee Lauder Cos., Inc., Class A

 

 

204,220

 

 

6,116,389

 

Retail-Drugs -- 1.3%

 

 

 

 

 

 

 

CVS Corp.

 

 

125,000

 

 

3,673,750

 

Soft Drinks -- 2.7%

 

 

 

 

 

 

 

Coca-Cola Co.

 

 

148,414

 

 

7,569,114

 

Tobacco -- 1.8%

 

 

 

 

 

 

 

Philip Morris Cos., Inc.

 

 

99,500

 

 

4,975,000

 

Total Consumer Staples

 

 

 

 

 

25,829,722

Energy -- 7.2%

 

 

 

 

 

 

 

Oil & Gas-Drilling -- 0.9%

 

 

 

 

 

 

 

(1)Transocean, Inc.

 

 

102,500

 

 

2,511,250

 

Oil & Gas Exploration & Production -- 0.8%

 

 

 

 

 

 

 

Anadarko Petroleum Corp.

 

 

51,300

 

 

2,290,032

 

Oil & Gas-Integrated -- 5.5%

 

 

 

 

 

 

ChevronTexaco Corp.

 

 

68,425

 

 

5,243,408

 

Exxon Mobil Corp.

 

 

285,542

 

 

10,122,464

 

 

 

 

 

 

 

15,365,872

 

Total Energy

 

 

 

 

 

20,167,154

Financials -- 21.1%

 

 

 

 

 

 

 

Banks -- 6.7%

 

 

 

 

 

 

 

Bank of America Corp.

 

 

102,500

 

 

7,183,200

 

Bank of New York Co., Inc.

 

 

119,640

 

 

4,205,346

 

Wells Fargo & Co.

 

 

142,080

 

 

7,415,155

 

 

 

 

 

 

 

18,803,701

 

Diversified Financial Services -- 9.6%

 

American Express Co.

 

 

152,460

 

 

5,497,708

 

Citigroup, Inc.

 

 

156,623

 

 

5,129,403

 

Federal Home Loan Mortgage Corp.

 

 

93,290

 

 

5,979,889

 

(1)Goldman Sachs Group, Inc.

 

 

76,900

 

 

5,944,370

 

Morgan Stanley

 

 

102,500

 

 

4,378,800

 

 

 

 

 

 

 

26,930,170

 

Insurance-Multi-Line -- 1.0%

 

 

 

 

 

 

American International Group, Inc.

 

 

42,024

 

 

2,639,107

 

Insurance-Property-Casualty -- 3.8%

 

Chubb Corp.

 

 

75,000

 

 

4,641,750

 

(1)MGIC Investment Corp.

 

 

89,520

 

 

5,389,999

 

(4)Travelers Property Casualty Corp., Class A

 

 

26,766

 

$

420,761

 

(4)Travelers Property Casualty Corp., Class B

 

 

13,902

 

 

226,464

 

 

 

 

 

 

 

10,678,974

 

Total Financials

 

 

 

 

 

59,051,952

Healthcare -- 16.9%

 

 

 

 

 

 

 

Healthcare-Distribution Services -- 1.4%

 

 

 

 

 

 

 

(1)Cardinal Health, Inc.

 

 

58,250

 

 

3,776,930

 

Healthcare-Equipment -- 1.0%

 

 

 

 

 

Guidant Corp.

 

 

75,000

 

 

2,760,000

 

Healthcare-Facility -- 4.2%

 

 

 

 

 

 

 

HCA, Inc.

 

 

254,800

 

 

11,860,940

 

Healthcare-Supplies -- 0.3%

 

 

 

 

 

 

 

(4)Alcon, Inc.

 

 

22,600

 

 

835,522

 

Pharmaceuticals -- 10.0%

 

 

 

 

 

 

 

Abbott Laboratories

 

 

47,300

 

 

1,893,419

 

Johnson & Johnson

 

 

43,870

 

 

2,382,580

 

Merck & Co., Inc.

 

 

52,670

 

 

2,660,888

 

(1)Pfizer, Inc.

 

 

241,010

 

 

7,972,611

 

Pharmacia Corp.

 

 

148,470

 

 

6,488,139

 

Schering Plough Corp.

 

 

107,620

 

 

2,483,870

 

Wyeth

 

 

98,740

 

 

4,226,072

 

 

 

 

 

 

 

28,107,579

 

Total Healthcare

 

 

 

 

 

47,340,971

Industrials -- 11.6%

 

 

 

 

 

 

 

Aerospace & Defense -- 3.0%

 

 

 

 

 

 

Boeing Co.

 

 

102,500

 

 

3,799,675

 

Honeywell International, Inc.

 

 

156,410

 

 

4,684,479

 

 

 

 

 

 

 

8,484,154

 

Industrial Conglomerates -- 6.7%

 

 

 

 

 

 

 

(1)(4)3M Co.

 

 

47,900

 

 

5,985,105

 

General Electric Co.

 

 

427,640

 

 

12,893,346

 

 

 

 

 

 

 

18,878,451

 

Machinery Industrial -- 1.9%

 

 

 

 

 

 

Parker-Hannifin Corp.

 

 

128,100

 

 

5,195,736

 

Total Industrials

 

 

 

 

 

32,558,341

Information Technology -- 13.5%

 

 

 

 

 

 

Computer Hardware -- 1.0%

 

 

 

 

 

 

International Business Machines Corp.

 

 

35,940

 

 

2,709,157

 

Computer Storage & Peripheral -- 0.8%

 

 

 

 

 

 

 

(4)Lexmark International Inc., Class A

 

 

44,380

 

 

2,094,736
               

 

Description

Shares or
Principal
Amount

Value

 

Electrical Equipment & Instrument -- 0.8%

 

 

 

 

 

 

 

(4)Flextronics International Ltd.

 

 

250,000

 

$

2,367,500

 

Networking Equipment -- 0.7%

 

 

 

 

(4)Cisco Systems, Inc.

 

 

150,000

 

 

2,073,000

 

Semiconductors -- 3.6%

 

 

 

 

 

 

 

Intel Corp.

 

 

245,100

 

 

4,085,817

 

Micron Technology, Inc.

 

 

137,780

 

 

2,376,705

 

Texas Instruments, Inc.

 

 

182,870

 

 

3,602,539

 

 

 

 

 

 

 

10,065,061

 

Semiconductor Equipment -- 0.9%

 

 

 

 

 

 

 

(4)Applied Materials, Inc.

 

 

197,200

 

 

2,634,592

 

Systems Software -- 5.7%

 

 

 

 

 

 

 

(4)BMC Software, Inc.

 

 

165,950

 

 

2,306,705

 

(4)Microsoft Corp.

 

 

266,870

 

 

13,097,980

 

(4)Veritas Software Corp.

 

 

33,040

 

 

534,918

 

 

 

 

 

 

 

15,939,603

 

Total Information Technology

 

 

 

 

 

37,883,649

Materials -- 3.4%

 

 

 

 

 

 

 

Aluminum -- 1.4%

 

 

 

 

 

 

 

Alcoa, Inc.

 

 

153,800

 

 

3,858,842

 

Forest Products -- 2.0%

 

 

 

 

 

 

 

Weyerhaeuser Co.

 

 

102,500

 

 

5,587,275

 

Total Materials

 

 

 

 

 

9,446,117

Telecommunication Services -- 1.5%

 

 

 

 

 

 

 

Integrated Telecommunication Services -- 1.5%

 

 

 

 

 

 

 

SBC Communications, Inc.

 

 

163,240

 

 

4,038,558

Total Common Stocks (identified cost $246,804,728)

 

 

 

 

 

274,182,608

(3)Repurchase Agreement -- 2.2%

 

 

 

 

 

 

Lehman Brothers, Inc., 1.80%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

6,010,102

 

 

6,010,102

Total Investments (identified cost $252,814,830)

 

 

 

 

$

280,192,710
             

 

Mid-Cap Value Fund

 

Description

   

   

Shares

   

Value

Common Stocks -- 97.2%

 

 

 

 

 

 

Consumer Discretionary -- 5.7%

 

 

 

 

 

 

Auto Parts & Equipment -- 1.1%

 

 

 

 

 

 

 

(1)Johnson Controls, Inc.

 

 

25,000

 

$

2,157,250

 

Housewares & Specialties -- 1.6%

 

 

 

 

 

 

 

Newell Rubbermaid, Inc.

 

 

95,000

 

 

3,287,000

 

Leisure Products -- 2.1%

 

 

 

 

 

 

 

(1)Mattel, Inc.

 

 

215,000

 

 

4,177,450

 

Retail-Apparel -- 0.9%

 

 

 

 

 

 

 

Ross Stores, Inc.

 

 

50,000

 

 

1,805,500

 

Total Consumer Discretionary

 

 

 

 

 

11,427,200

Consumer Staples -- 6.8%

 

 

 

 

 

 

 

Food Distributors -- 1.5%

 

 

 

 

 

 

 

SUPERVALU, Inc.

 

 

145,000

 

 

3,011,650

 

Packaged Food & Meats -- 1.0%

 

 

 

 

 

 

 

(4)Ralcorp Holdings, Inc.

 

 

85,000

 

 

2,016,200

 

Retail-Drugs -- 2.3%

 

 

 

 

 

 

 

CVS Corp.

 

 

155,000

 

 

4,555,450

 

Retail-Food -- 2.0%

 

 

 

 

 

 

 

(4)Kroger Co., Inc.

 

 

225,000

 

 

4,068,000

 

Total Consumer Staples

 

 

 

 

 

13,651,300

Energy -- 5.7%

 

 

 

 

 

 

 

Oil & Gas Drilling -- 1.5%

 

 

 

 

 

 

 

(4)Noble Corp.

 

 

95,000

 

 

2,951,650

 

Oil & Gas Exploration & Products -- 4.2%

 

 

 

 

 

 

 

Burlington Resources, Inc.

 

 

125,000

 

 

4,808,750

 

Noble Energy, Inc.

 

 

112,200

 

 

3,741,870

 

 

 

 

 

 

 

8,550,620

 

Total Energy

 

 

 

 

 

11,502,270

Financials -- 13.4%

 

 

 

 

 

 

 

Banks -- 1.3%

 

 

 

 

 

 

 

Associated Banc Corp.

 

 

74,650

 

 

2,598,566

 

Consumer Finance -- 2.3%

 

 

 

 

 

 

 

(1)Countrywide Credit Industries, Inc.

 

 

90,000

 

 

4,724,100

 

Diversified Financial Services -- 1.4%

 

 

 

 

 

 

 

(1)(4)CIT Group, Inc.

 

 

130,000

 

 

2,827,500

 

Insurance-Life & Health -- 1.1%

 

 

 

 

 

 

 

Jefferson-Pilot Corp.

 

 

50,000

 

$

2,106,000

 

Insurance-Property & Casualty -- 5.7%

 

 

 

 

 

 

 

(1)ACE Ltd.

 

 

70,000

 

 

2,226,700

 

MGIC Investment Corp.

 

 

61,000

 

 

3,672,810

 

(1)SAFECO Corp.

 

 

165,000

 

 

5,463,150

 

 

 

 

 

 

 

11,362,660

 

Reinsurance -- 1.6%

 

 

 

 

 

 

 

PartnerRe Ltd.

 

 

73,400

 

 

3,300,064

 

Total Financials

 

 

 

 

 

26,918,890

Healthcare -- 11.2%

 

 

 

 

 

 

 

Biotechnology -- 0.9%

 

 

 

 

 

 

 

(4)Invitrogen Corp.

 

 

50,000

 

 

1,780,000

 

Healthcare-Distribution Services -- 2.1%

 

 

 

 

 

 

 

(1)(4)Renal Care Group, Inc.

 

 

130,000

 

 

4,267,900

 

Healthcare-Equipment -- 3.1%

 

 

 

 

 

 

 

(4)Boston Scientific Corp.

 

 

70,000

 

 

2,040,500

 

Guidant Corp.

 

 

115,000

 

 

4,232,000

 

 

 

 

 

 

 

6,272,500

 

Healthcare-Facility -- 2.8%

 

 

 

 

 

 

 

(4)Manor Care, Inc.

 

 

235,200

 

 

5,513,088

 

Healthcare-Supplies -- 2.3%

 

 

 

 

 

Bausch & Lomb, Inc.

 

 

145,000

 

 

4,566,050

 

Total Healthcare

 

 

 

 

 

22,399,538

Industrials -- 22.7%

 

 

 

 

 

 

 

Aerospace & Defense -- 1.5%

 

 

 

 

 

 

 

(1)Northrop Grumman Corp.

 

 

25,000

 

 

3,070,000

 

Commercial Printing -- 0.2%

 

 

 

 

 

 

 

Donnelley (R.R.) & Sons Co.

 

 

18,600

 

 

490,668

 

Construction & Engineering -- 0.7%

 

 

 

 

 

 

 

Fluor Corp.

 

 

50,000

 

 

1,383,000

 

Electrical Components -- 1.9%

 

 

 

 

 

 

 

Rockwell Automation, Inc.

 

 

203,300

 

 

3,744,786

 

Electrical Equipment -- 2.2%

 

 

 

 

 

Hubbell, Inc., Class B

 

 

140,000

 

 

4,494,000

 

Machinery Industrial -- 2.2%

 

 

 

 

 

SPX Corp.

 

 

40,000

 

 

4,344,000

 

Rail Roads -- 2.4%

 

 

 

 

 

 

 

CSX Corp.

 

 

135,000

 

$

4,702,050

 

Services-Data Processing -- 1.2%

 

 

 

 

 

 

 

(1)(4)Global Payments, Inc.

 

 

87,200

 

 

2,429,392

 

Services-Diversified Commercials -- 3.9%

 

 

 

 

 

 

 

(1)H&R Block, Inc.

 

 

25,000

 

 

1,222,500

 

Viad Corp.

 

 

160,000

 

 

3,540,800

 

(1)(4)Watson Wyatt & Company Holdings

 

 

150,000

 

 

3,084,000

 

 

 

 

 

 

 

7,847,300

 

Services-Employment -- 1.8%

 

 

 

 

 

 

Manpower, Inc.

 

 

110,000

 

 

3,643,200

 

Services-Environmental -- 2.3%

 

 

 

 

 

(4)Republic Services, Inc.

 

 

220,000

 

 

4,532,000

 

Trucking -- 2.4%

 

 

 

 

 

 

 

(4)Landstar System, Inc.

 

 

50,000

 

 

2,532,500

 

(4)Swift Transportation Co., Inc.

 

 

125,000

 

 

2,198,750

 

 

 

 

 

 

 

4,731,250

 

Total Industrials

 

 

 

 

 

45,411,646

Information Technology -- 11.6%

 

 

 

 

 

 

 

Computer Storage & Peripheral -- 1.7%

 

 

 

 

 

 

 

(4)Electronics for Imaging, Inc.

 

 

230,000

 

 

3,456,900

 

Electrical Equipment & Instruments -- 0.6%

 

 

 

 

 

 

 

(1) (4)Celestica, Inc.

 

 

50,000

 

 

1,148,500

 

IT Consulting & Services -- 4.4%

 

 

 

 

 

 

 

(4)American Management System, Inc.

 

 

235,000

 

 

3,525,000

 

(4)Computer Sciences Corp.

 

 

68,000

 

 

2,504,440

 

(4)Keane, Inc.

 

 

330,000

 

 

2,673,000

 

 

 

 

 

 

 

8,702,440

 

Office Electronics -- 2.2%

 

 

 

 

 

 

 

(1)IKON Office Solutions, Inc.

 

 

485,000

 

 

4,486,250

 

Semiconductors Equipment -- 0.5%

 

 

 

 

 

 

 

(4)Teradyne, Inc.

 

 

75,000

 

 

948,750

 

Systems Software -- 1.6%

 

 

 

 

 

 

 

(4)BMC Software, Inc.

 

 

235,000

 

 

3,266,500

 

Telecommunications Equipment -- 0.6%

 

 

 

 

 

 

 

(4)CommScope, Inc.

 

 

180,000

 

 

1,216,800

 

Total Information Technology

 

 

 

 

 

23,226,140
 

 

Description

Shares or
Principal
Amount

Value

Materials -- 11.6%

 

 

 

 

 

 

 

Construction Materials -- 1.5%

 

 

 

 

 

 

 

Martin Marietta Materials, Inc.

 

 

81,000

 

$

2,967,840

 

Chemicals & Specialty -- 1.6%

 

 

 

 

 

 

 

(1)H.B. Fuller Co.

 

 

120,000

 

 

3,234,000

 

Diversified Metal & Mining -- 3.5%

 

 

 

 

 

 

 

Arch Coal, Inc.

 

 

207,800

 

 

3,802,740

 

(1)Fording, Inc.

 

 

216,900

 

 

3,257,838

 

 

 

 

 

 

 

7,060,578

 

Steel -- 1.8%

 

 

 

 

 

 

 

Nucor Corp.

 

 

70,000

 

 

3,502,800

 

Paper Products -- 1.8%

 

 

 

 

 

 

 

Bowater, Inc.

 

 

90,000

 

 

3,679,200

 

Paper Packaging -- 1.4%

 

 

 

 

 

 

 

(1)(4)Packaging Corp. of America

 

 

145,200

 

 

2,734,116

 

Total Materials

 

 

 

 

 

23,178,534

Telecommunication Services -- 3.3%

 

 

 

 

 

 

 

Integrated Telecommunication Services -- 3.3%

 

 

 

 

 

 

 

ALLTEL Corp.

 

 

97,600

 

 

4,105,056

 

(1)Citizens Communications Co., Class B

 

 

350,000

 

 

2,562,000

 

Total Telecommunication Services

 

 

 

 

 

6,667,056

Utilities -- 5.2%

 

 

 

 

 

 

 

Electric Utilities -- 5.2%

 

 

 

 

 

 

 

ALLETE, Inc.

 

 

60,000

 

 

1,494,000

 

Cinergy Corp.

 

 

100,000

 

 

3,440,000

 

(1)TECO Energy, Inc.

 

 

190,000

 

 

3,752,500

 

(1)Xcel Energy, Inc.

 

 

170,000

 

 

1,642,200

 

Total Utilities

 

 

 

 

 

10,328,700

Total Common Stocks (identified cost $184,228,844)

 

 

 

 

 

194,711,274

(3)Repurchase Agreement -- 2.6%

 

 

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

5,139,030

 

 

5,139,030

Total Investments (identified cost $189,367,874)

 

 

 

 

$

199,850,304

Mid-Cap Growth Fund

 

Description

   

Shares

Value

Common Stocks -- 92.1%

 

 

 

 

 

 

Consumer Discretionary -- 20.0%

 

 

 

 

 

Broadcasting & Cable -- 7.0%

 

 

 

 

 

 

(4)Cox Radio, Inc., Class A

 

 

185,000

 

$

4,436,300

 

(1)(4)Mediacom Communications Corp.

 

 

500,000

 

 

2,950,000

 

(4)Liberty Media Corp., Class A

 

 

350,000

 

 

2,926,000

 

(1)(4)Radio One, Inc., Class D

 

 

265,000

 

 

4,168,450

 

 

 

 

 

 

 

14,480,750

 

Department Stores -- 3.5%

 

 

 

 

 

 

 

(1)(4)Stage Stores, Inc.

 

 

336,200

 

 

7,282,092

 

Leisure Facilities -- 1.7%

 

 

 

 

 

 

 

(1)(4)Six Flags, Inc.

 

 

675,000

 

 

3,422,250

 

Leisure Products -- 3.6%

 

 

 

 

 

 

 

Brunswick Corp.

 

 

300,000

 

 

7,335,000

 

Specialty Stores -- 4.2%

 

 

 

 

 

 

 

(4)Advance Auto Parts, Inc.

 

 

65,000

 

 

3,396,250

 

(4)Copart, Inc.

 

 

200,000

 

 

2,814,000

 

(4)Staples, Inc.

 

 

175,000

 

 

2,432,500

 

 

 

 

 

 

 

8,642,750

 

Total Consumer Discretionary

 

 

 

 

 

41,162,842

Consumer Staples -- 2.5%

 

 

 

 

 

 

 

Food Distributors -- 2.5%

 

 

 

 

 

 

 

(1)(4)Performance Food Group Co.

 

 

150,000

 

 

5,197,500

Energy -- 8.9%

 

 

 

 

 

 

 

Oil & Gas Drilling -- 4.6%

 

 

 

 

 

 

 

(1)(4)Nabors Industries, Inc.

 

 

90,000

 

 

2,971,800

 

(4)Noble Corp.

 

 

110,000

 

 

3,417,700

 

(1)(4)Pride International, Inc.

 

 

225,000

 

 

3,010,500

 

 

 

 

 

 

 

9,400,000

 

Oil & Gas Exploration & Production -- 4.3%

 

 

 

 

 

 

 

Noble Energy, Inc.

 

 

120,000

 

 

4,002,000

 

(1)Ocean Energy, Inc.

 

 

230,000

 

 

4,820,800

 

 

 

 

 

 

 

8,822,800

 

Total Energy

 

 

 

 

 

18,222,800

Financials -- 10.7%

 

 

 

 

 

 

 

Reinsurance -- 5.8%

 

 

 

 

 

 

 

(1)Everest Re Group Ltd.

 

 

95,000

 

 

5,149,000

 

PartnerRe Ltd.

 

 

150,000

 

 

6,744,000

 

 

 

 

 

 

 

11,893,000

 

Insurance-Life & Health -- 1.1%

 

 

 

 

 

 

 

Lincoln National Corp.

 

 

60,000

 

 

2,223,000

 

Insurance-Property & Casualty -- 3.8%

 

 

 

 

 

 

 

MGIC Investment Corp.

 

 

70,000

 

$

4,214,700

 

Old Republic International Corp.

 

110,000

 

 

3,531,000

 

 

 

 

 

 

 

7,745,700

 

Total Financials

 

 

 

 

 

21,861,700

Healthcare -- 22.2%

 

 

 

 

 

 

 

Biotechnology -- 2.8%

 

 

 

 

 

 

 

(1)(4)BioMarin Pharmaceutical, Inc.

 

 

10,900

 

 

45,126

 

(1)(4)Charles River Laboratories International, Inc.

 

 

90,000

 

 

3,559,500

 

(4)Gilead Sciences, Inc.

 

 

70,000

 

 

2,245,600

 

 

 

 

 

 

 

5,850,226

 

Healthcare-Distribution Services -- 12.0%

 

 

 

 

 

 

 

(1)(4)AdvancePCS

 

 

175,000

 

 

3,388,000

 

(4)AmerisourceBergen Corp.

 

 

100,000

 

 

7,251,000

 

(1)(4)Covance, Inc.

 

 

150,000

 

 

2,928,000

 

(1)(4)Pediatrix Medical Group, Inc.

 

 

100,000

 

 

3,359,000

 

(1)(4)Priority Healthcare Corp., Class B

 

 

175,000

 

 

4,397,750

 

(4)Quest Diagnostic, Inc.

 

 

60,000

 

 

3,363,000

 

 

 

 

 

 

 

24,686,750

 

Healthcare-Managed Care -- 1.5%

 

 

 

 

 

 

 

(1)(4)Caremark Rx, Inc.

 

 

185,000

 

 

2,997,000

 

Healthcare-Facility -- 2.2%

 

 

 

 

 

 

 

(4)Universal Health Services, Inc., Class B

 

 

100,000

 

 

4,572,000

 

Pharmaceuticals -- 3.7%

 

 

 

 

 

 

 

Allergan, Inc.

 

 

25,000

 

 

1,468,000

 

(1)(4)Biovail Corp.

 

 

90,000

 

 

2,415,600

 

(4)King Pharmaceuticals, Inc.

 

 

175,000

 

 

3,729,250

 

 

 

 

 

 

 

7,612,850

 

Total Healthcare

 

 

 

 

 

45,718,826

Industrials -- 9.9%

 

 

 

 

 

 

 

Aerospace & Defense -- 2.0%

 

 

 

 

 

 

 

(1)(4)InVision Technologies, Inc.

 

 

120,000

 

 

4,095,600

 

Airfreight & Logistics -- 1.3%

 

 

 

 

 

 

 

(1)Expeditors International Washington, Inc.

 

 

100,000

 

 

2,635,000
               

 

Description

Shares or
Principal
Amount

Value

Machinery Industrial -- 2.6%

 

 

 

 

 

 

 

(1)SPX Corp.

 

 

50,000

 

$

5,430,000

Services-Data Processing -- 3.2%

 

(4)Bisys Group, Inc.

 

 

125,000

 

 

3,185,000

 

(1)(4)Concord EFS, Inc.

 

 

170,000

 

 

3,469,700

 

 

 

 

 

 

 

6,654,700

Services-Office Supplies -- 0.8%

 

 

 

 

 

 

 

Herman Miller, Inc.

 

 

100,000

 

 

1,549,000

 

Total Industrials

 

 

 

 

 

20,364,300

Information Technology -- 17.9%

 

 

 

 

 

 

 

Application Software -- 2.0%

 

 

 

 

 

 

 

(4)Cerner Corp.

 

 

70,000

 

 

2,615,200

 

(4)Intuit, Inc.

 

 

30,000

 

 

1,338,900

 

(4)Vastera, Inc.

 

 

48,700

 

 

116,880

 

 

 

 

 

 

 

4,070,980

 

Internet Software & Services -- 3.2%

 

 

 

 

 

 

 

(4)PEC Solutions, Inc.

 

 

140,000

 

 

3,270,400

 

(1)(4)USA Interactive

 

 

150,000

 

 

3,213,000

 

 

 

 

 

 

 

6,483,400

 

IT Consulting & Services -- 3.2%

 

 

 

 

 

 

 

(1)(4)Affiliated Computer Services, Inc., Class A

 

 

150,000

 

 

6,675,000

 

Semiconductors -- 6.8%

 

 

 

 

 

 

 

(1)(4)Conexant Systems, Inc.

 

 

475,000

 

 

703,000

 

(1)(4)Intersil Corp., Class A

 

 

400,000

 

 

6,768,000

 

(4)Microchip Technology, Inc.

 

 

140,000

 

 

2,947,000

 

(1)(4)Skyworks Solutions, Inc.

 

 

850,000

 

 

3,570,000

 

 

 

 

 

 

 

13,988,000

 

Semiconductors Equipment -- 2.7%

 

 

 

 

 

 

 

(1)(4)ATMI, Inc.

 

 

170,000

 

 

2,895,100

 

(4)Entegris, Inc.

 

 

300,000

 

 

2,709,000

 

 

 

 

 

 

 

5,604,100

 

Total Information Technology

 

 

 

36,821,480

Total Common Stocks (identified cost $221,033,990)

 

 

 

 

 

189,349,448

U.S. Treasury Bill -- 0.6%

 

 

 

 

 

 

 

10/10/2002 (identified cost $1,247,744)

 

$

1,250,000

 

 

1,247,893

Total Investments in Securities (identified cost $222,281,734)

 

 

 

 

 

190,597,341
               

 

Description

Principal
Amount

Value

(3)Repurchase Agreement -- 7.5%

 

 

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

15,352,862

 

$

15,352,862

Total Investments (identified cost $237,634,596)

 

 

 

 

$

205,950,203

 

Small-Cap Growth Fund

 

Description

    

Shares

   

Value

Common Stocks -- 96.5%

 

 

 

 

 

 

Consumer Discretionary -- 34.1%

 

 

 

 

 

 

 

Broadcasting -- 3.0%

 

 

 

 

 

 

 

(4)Alliance Atlantis Communications, Inc., Class B

 

150,000

 

$

1,708,500

 

(4)Spanish Broadcasting System, Inc., Class A

 

 

100,000

 

 

707,000

 

 

 

 

 

 

 

2,415,500

 

Casino/Gaming -- 7.3%

 

 

 

 

 

 

 

(4)Ameristar Casinos, Inc.

 

 

140,000

 

 

2,363,200

 

(1)(4)Argosy Gaming Co.

 

 

50,000

 

 

1,400,000

 

Pinnacle Entertainment, Inc.

 

 

250,000

 

 

2,125,000

 

 

 

 

 

 

 

5,888,200

 

Hotel/Resort/Cruise -- 7.0%

 

 

 

 

 

 

 

Intrawest Corp.

 

 

200,000

 

 

3,288,000

 

(1)(4)Orient-Express Hotels Ltd., Class A

 

 

180,000

 

 

2,331,000

 

 

 

 

 

 

 

5,619,000

 

Household Appliances -- 0.4%

 

 

 

 

 

 

 

Helen of Troy Ltd. (4)

 

 

25,000

 

 

299,000

 

Leisure Products -- 7.9%

 

 

 

 

 

 

 

(4)Acclaim Entertainment, Inc.

 

 

155,000

 

 

426,250

 

(1)(4)Activision, Inc.

 

 

45,000

 

 

1,254,150

 

(4)Midway Games, Inc.

 

 

350,000

 

 

2,152,500

 

(1)(4)Take-Two Interactive Software, Inc.

 

 

100,000

 

 

2,510,000

 

 

 

 

 

 

 

6,342,900

 

Retail -- 3.0%

 

 

 

 

 

 

 

(4)The Wet Seal, Inc., Class A

 

 

85,000

 

 

940,100

 

(4)ValueVision Media, Inc., Class A

 

 

100,000

 

 

1,423,000

 

 

 

 

 

 

 

2,363,100

 

Retail-Apparel -- 4.1%

 

 

 

 

 

 

 

(4)Abercrombie & Fitch Co., Class A

 

 

50,000

 

 

1,140,000

 

(4)American Eagle Outfitters, Inc.

 

 

80,000

 

 

1,176,800

 

(1)(4)Hot Topic, Inc.

 

 

55,000

 

$

957,000

 

 

 

 

 

 

 

3,273,800

 

Retail-Computer/Electrical -- 1.4%

 

 

 

 

 

 

 

(1)(4)Ultimate Electronics, Inc.

 

 

100,000

 

 

1,100,000

 

Total Consumer Discretionary

 

 

 

 

 

27,301,500

Energy -- 11.7%

 

 

 

 

 

 

 

Oil & Gas-Drilling -- 3.0%

 

 

 

 

 

 

 

(4)Patterson-UTI Energy, Inc.

 

 

55,000

 

 

1,373,900

 

(4)Pride International, Inc.

 

 

75,000

 

 

1,003,500

 

 

 

 

 

 

 

2,377,400

 

Oil & Gas-Equipment/Services -- 5.9%

 

 

 

 

 

 

 

(1)(4)Cal Dive International, Inc.

 

55,000

 

 

1,025,750

 

(4)Horizon Offshore, Inc.

 

 

150,000

 

 

780,000

 

(1)(4)Lone Star Technologies, Inc.

 

 

100,000

 

 

1,517,000

 

(4)National-Oilwell, Inc.

 

 

75,000

 

 

1,419,000

 

 

 

 

 

 

 

4,741,750

 

Oil & Gas-Exploration/Production -- 2.8%

 

 

 

 

 

 

 

Noble Energy, Inc.

 

 

40,000

 

 

1,334,000

 

(4)Ultra Petroleum Corp.

 

 

115,000

 

 

920,000

 

 

 

 

 

 

 

2,254,000

 

Total Energy

 

 

 

 

 

9,373,150

Financials -- 10.4%

 

 

 

 

 

 

 

Banks -- 8.6%

 

 

 

 

 

 

 

Astoria Financial Corp.

 

 

50,000

 

 

1,674,000

 

Cullen Frost Bankers, Inc.

 

 

40,000

 

 

1,496,000

 

(4)Indy Mac Bancorp, Inc.

 

 

80,000

 

 

1,824,000

 

(4)Southwest Bancorporation of Texas, Inc.

 

 

50,000

 

 

1,899,000

 

 

 

 

 

 

 

6,893,000

 

Consumer Finance -- 1.1%

 

 

 

 

 

 

 

Doral Financial Corp.

 

 

20,000

 

 

847,800

 

Insurance -- 0.7%

 

 

 

 

 

 

 

(4)Meadowbrook Insurance Group, Inc.

 

 

225,000

 

 

580,500

 

Total Financials

 

 

 

 

 

8,321,300

Healthcare -- 17.4%

 

 

 

 

 

 

 

Biotechnology -- 9.6%

 

 

 

 

 

 

 

(4)Celgene Corp.

 

 

70,000

 

 

1,216,600

 

(1)(4)Cell Genesys, Inc.

 

 

35,000

 

 

404,950

 

(4)Cephalon, Inc.

 

 

40,000

 

 

1,740,000

 

(1)(4)CV Therapeutics, Inc.

 

 

100,000

 

 

2,173,200

 

(1)(4)Charles River Laboratories International, Inc.

 

55,000

 

 

2,175,250

 

 

 

 

 

 

 

7,710,000

 

Healthcare-Distribution/Services -- 6.3%

 

 

 

 

 

 

 

(1)(4)Covance, Inc.

 

 

85,000

 

$

1,659,200

 

(1)(4)Priority HealthCare Corp., Class B

 

 

135,000

 

 

3,392,550

 

 

 

 

 

 

 

5,051,750

 

Healthcare-Facility -- 1.5%

 

 

 

 

 

 

 

(1)(4)Community Health Systems, Inc.

 

 

50,000

 

 

1,195,000

 

Total Healthcare

 

 

 

 

 

13,956,750

Information Technology -- 22.9%

 

 

 

 

 

 

 

Application Software -- 4.0%

 

 

 

 

 

 

 

(1)(4)Quest Software, Inc.

 

 

127,600

 

 

1,321,936

 

(4)Rational Software Corp.

 

 

150,000

 

 

1,020,000

 

(4)Verity, Inc.

 

 

80,000

 

 

872,000

 

 

 

 

 

 

 

3,213,936

 

Internet Software -- 0.5%

 

 

 

 

 

 

 

(4)Vignette Corp.

 

 

500,000

 

 

445,000

 

IT Consulting -- 1.3%

 

 

 

 

 

 

 

(4)KPMG Consulting, Inc.

 

 

100,000

 

 

1,015,000

 

Networking Equipment -- 2.1%

 

 

 

 

 

 

 

(1)(4)Emulex Corp.

 

 

100,000

 

 

1,688,000

 

Semiconductor -- 6.2%

 

 

 

 

 

 

 

(4)Integrated Circuit Systems, Inc.

 

 

70,000

 

 

1,248,100

 

(4)MKS Instruments, Inc.

 

 

90,000

 

 

1,224,900

 

(1)(4)PMC-Sierra, Inc.

 

 

70,000

 

 

490,000

 

(4)Skyworks Solutions, Inc.

 

 

475,000

 

 

1,995,000

 

 

 

 

 

 

 

4,958,000

 

Telecommunication Equipment -- 8.8%

 

 

 

 

 

 

 

(1)(4)Advanced Fibre Communications, Inc.

 

 

90,000

 

 

1,587,600

 

(1)(4)Powerwave Technologies, Inc.

 

 

475,000

 

 

2,945,000

 

(4)Tekelec

 

 

120,000

 

 

1,178,280

 

(4)UTStarcom, Inc.

 

 

100,000

 

 

1,320,000

 

 

 

 

 

 

 

7,030,880

 

Total Information Technology

 

 

 

 

 

18,350,816

Total Common Stocks (identified cost $78,888,399)

 

 

 

 

 

77,303,516
               

 

Description

Principal
Amount

Value

(3)Repurchase Agreement -- 1.5%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

1,234,842

 

$

1,234,842

Total Investments (identified cost $80,123,241)

 

 

 

 

$

78,538,358

International Stock Fund

Description

   

Shares

   

Value

Common Stocks -- 100.6%

 

 

 

 

 

 

Australia -- 1.4%

 

 

 

 

 

 

Banks -- 1.1%

 

 

 

 

 

 

 

(1)National Australia Bank Ltd., Melbourne

 

 

169,600

 

$

3,230,094

 

Transportation -- 0.3%

 

 

 

 

 

 

 

Qantas Airways Ltd.

 

 

483,900

 

 

1,111,778

 

Total Australia

 

 

 

 

 

4,341,872

Belgium -- 1.5%

 

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

Dexia

 

 

349,300

 

 

4,617,923

Bermuda -- 0.5%

 

 

 

 

 

 

 

IT Consulting & Services -- 0.5%

 

 

 

 

(4)Accenture Ltd.

 

 

99,300

 

 

1,633,485

Brazil -- 1.2%

 

 

 

 

 

 

 

Metals & Mining -- 1.2%

 

 

 

 

 

 

 

Companhia Vale Do Rio Doce, ADR

 

 

159,850

 

 

3,744,713

Canada -- 1.7%

 

 

 

 

 

 

 

Banks -- 1.3%

 

 

 

 

 

 

 

Royal Bank of Canada, Montreal

 

 

105,200

 

 

3,780,287

 

Financial Services -- 0.4%

 

 

 

 

 

 

 

Manulife Financial Corp.

 

 

55,500

 

 

1,291,700

 

Total Canada

 

 

 

 

 

5,071,987

Finland -- 1.9%

 

 

 

 

 

 

 

IT Consulting & Services -- 0.2%

 

 

 

 

TietoEnator OYJ

 

 

36,800

 

 

566,638

 

Paper & Forest Products -- 0.5%

 

 

 

 

Stora Enso OYJ, Class R

 

 

139,100

 

 

1,536,115

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Nokia OYJ

 

 

51,500

 

 

687,927

 

Nokia OYJ, Class A, ADR

 

 

233,000

 

 

3,096,570

 

 

 

 

 

 

 

3,784,497

 

Total Finland

 

 

 

 

 

5,887,250

France -- 10.5%

 

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

BNP Paribas SA

 

 

96,600

 

$

4,505,855

 

Construction Equipment -- 1.9%

 

 

 

 

 

(1)Technip

 

 

42,300

 

 

3,235,886

 

(1)Vinci SA

 

 

40,000

 

 

2,434,221

 

 

 

 

 

 

 

5,670,107

 

Domestic & International Oil -- 1.8%

 

 

 

 

 

 

 

(1)Total Fina SA, Class B

 

 

38,300

 

 

5,461,619

 

Healthcare -- 1.0%

 

 

 

 

 

 

 

(1)Aventis SA

 

 

50,300

 

 

2,962,370

 

Industrial Gases -- 0.8%

 

 

 

 

 

 

 

L'Air Liquide SA

 

 

18,262

 

 

2,530,747

 

Media -- 0.9%

 

 

 

 

 

 

 

(1)Thomson Multimedia

 

 

131,872

 

 

2,619,002

 

Metals & Mining -- 0.4%

 

 

 

 

 

 

 

(1)Pechiney SA, Class A

 

 

36,200

 

 

1,325,687

 

Water Treatment -- 2.2%

 

 

 

 

 

 

 

(1)(4)Vivendi Environment

 

 

266,350

 

 

6,572,364

 

(1)(4)Vivendi Environment, Warrants

 

 

48,300

 

 

6,158

 

 

 

 

 

 

 

6,578,522

 

Total France

 

 

 

 

 

31,653,909

Germany -- 5.1%

 

 

 

 

 

 

 

Automotive -- 1.2%

 

 

 

 

 

 

 

Bayerische Motoren Werke AG

 

 

92,200

 

 

3,484,985

 

Drugs -- 0.9%

 

 

 

 

 

 

 

Schering AG

 

 

49,100

 

 

2,716,413

 

Healthcare -- 0.4%

 

 

 

 

 

 

 

(1)Fresenius Medical Care AG

 

 

40,562

 

 

1,157,632

 

Household Product/Wares -- 1.1%

 

 

 

 

Adidas-Salomon AG

 

 

46,400

 

 

3,310,619

 

Insurance -- 1.5%

 

 

 

 

 

 

 

(1)Allianz AG

 

 

10,730

 

 

1,378,466

 

Muenchener Rueckversicherungs-Gesellschaft AG

 

17,720

 

 

3,227,086

 

 

 

 

 

 

 

4,605,552

 

Total Germany

 

 

 

 

 

15,275,201

Hong Kong -- 1.5%

 

 

 

 

 

 

 

Telecommunications -- 0.9%

 

 

 

 

 

 

 

(4)China Mobile (Hong Kong) Ltd.

 

 

936,900

 

 

2,594,526

 

Transportation -- 0.6%

 

 

 

 

 

 

 

Cathay Pacific Airways Ltd.

 

 

1,270,100

 

$

1,970,309

 

Total Hong Kong

 

 

 

 

 

4,564,835

Ireland -- 3.0%

 

 

 

 

 

 

 

Banks -- 2.0%

 

 

 

 

 

 

 

Bank of Ireland

 

 

517,400

 

 

6,018,238

 

Construction Materials -- 1.0%

 

 

 

 

CRH PLC

 

 

210,100

 

 

3,018,714

 

Total Ireland

 

 

 

 

 

9,036,952

Italy -- 4.9%

 

 

 

 

 

 

 

Insurance -- 0.8%

 

 

 

 

 

 

 

Riunione Adriatica di Sicurta SpA

 

205,100

 

 

2,353,476

 

Media -- 1.1%

 

 

 

 

 

 

 

(1)Mediaset SpA

 

 

474,400

 

 

3,270,832

 

Oil & Gas Products -- 1.8%

 

 

 

 

 

 

 

(1)ENI SpA

 

 

360,100

 

 

5,452,914

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Telecom Italia SpA

 

 

698,300

 

 

3,739,323

 

Total Italy

 

 

 

 

 

14,816,545

Japan -- 12.4%

 

 

 

 

 

 

 

Air Freight & Couriers -- 0.9%

 

 

 

 

 

 

 

(1)Yamato Transport

 

 

157,900

 

 

2,679,652

 

Automotive -- 3.2%

 

 

 

 

 

 

 

(1)Honda Motor Co., Ltd.

 

 

47,100

 

 

1,991,342

 

Nissan Motor Co., Ltd.

 

 

1,062,200

 

 

7,747,212

 

 

 

 

 

 

 

9,738,554

 

Chemical -- 0.6%

 

 

 

 

 

 

 

Takeda Chemical Industries, Ltd.

 

43,900

 

 

1,852,352

 

Financial Services -- 0.5%

 

 

 

 

 

 

 

Nomura Securities Co., Ltd.

 

 

108,700

 

 

1,430,902

 

Insurance -- 0.7%

 

 

 

 

 

 

 

(4)Millea Holdings, Inc.

 

 

272

 

 

2,203,765

 

Leisure & Recreation -- 2.3%

 

 

 

 

 

 

(1)(4)Sega Enterprises

 

 

285,200

 

 

6,833,655

 

Office Equipment -- 1.0%

 

 

 

 

 

 

 

(1)Ricoh Co., Ltd.

 

 

168,800

 

 

3,013,905

 

Retail -- 1.7%

 

 

 

 

 

 

 

Ito-Yokado Co., Ltd.

 

 

121,900

 

 

5,184,613

 

Telecommunications -- 1.5%

 

 

 

 

 

 

 

Nippon Television Network Corp.

 

318

 

 

1,623,009

 

NTT DoCoMo, Inc.

 

 

1,420

 

 

3,013,770

 

 

 

 

 

 

 

4,636,779

 

Total Japan

 

 

 

 

 

37,574,177

Korea, Republic of -- 5.4%

 

 

 

 

 

 

 

Automotive -- 0.9%

 

 

 

 

 

 

 

Hyundai Motor Co., Ltd.

 

 

94,760

 

$

2,691,821

 

Banks -- 1.3%

 

 

 

 

 

 

 

Kookmin Bank

 

 

75,663

 

 

3,552,728

 

(4)Kookmin Bank, ADR

 

 

9,174

 

 

429,343

 

 

 

 

 

 

 

3,982,071

 

Electronics -- 2.0%

 

 

 

 

 

 

 

Samsung Electronics Co.

 

 

21,360

 

 

5,907,060

 

Metals & Mining -- 0.2%

 

 

 

 

 

 

 

Pohang Iron and Steel Co. Ltd., ADR

 

25,200

 

 

575,820

 

Telecommunications -- 1.0%

 

 

 

 

 

 

 

SK Telecom Co., Ltd., ADR

 

 

76,400

 

 

1,662,464

 

(4)KT Corp., ADR

 

 

60,300

 

 

1,369,413

 

 

 

 

 

 

 

3,031,877

 

Total Korea, Republic of

 

 

 

 

 

16,188,649

Mexico -- 5.0%

 

 

 

 

 

 

 

Beverages & Foods -- 1.5%

 

 

 

 

 

 

 

(4)Fomento Economico Mexicano, SA de CV, ADR

 

 

45,600

 

 

1,717,752

 

Grupo Modelo, SA de CV, Class C

 

 

1,153,100

 

 

2,895,834

 

 

 

 

 

 

 

4,613,586

 

Broadcasting & Cable TV -- 1.0%

 

 

 

 

(4)Grupo Televisa SA, GDR

 

 

95,800

 

 

3,040,692

 

Financial Services -- 1.1%

 

 

 

 

 

 

 

Grupo Financiero BBVA Bancomer, SA de CV

 

 

4,198,400

 

 

3,328,232

 

Retail -- 0.3%

 

 

 

 

 

 

 

Wal-Mart de Mexico SA de CV

 

 

278,900

 

 

754,985

 

Telecommunications -- 1.1%

 

 

 

 

 

 

 

Telefonos de Mexico, SA de CV, Class L, ADR

 

 

110,400

 

 

3,271,152

 

Total Mexico

 

 

 

 

 

15,008,647

Netherlands -- 6.3%

 

 

 

 

 

 

 

Chemicals -- 1.1%

 

 

 

 

 

 

 

Akzo Nobel NV

 

 

88,900

 

 

3,314,913

 

Domestic & International Oil -- 1.0%

 

 

 

 

 

 

 

(1)Royal Dutch Petroleum Co.

 

 

68,700

 

 

3,099,366

 

Financial Services -- 1.8%

 

 

 

 

 

 

 

(1)ING Group NV

 

 

199,900

 

$

4,364,115

 

(1)Van der Moolen Holding NV

 

 

39,900

 

 

864,815

 

 

 

 

 

 

 

5,228,930

 

Transportation -- 2.4%

 

 

 

 

 

 

 

TPG NV

 

 

369,900

 

 

7,295,493

 

Total Netherlands

 

 

 

 

 

18,938,702

Russia -- 1.3%

 

 

 

 

 

 

 

Domestic & International Oil -- 1.3%

 

 

 

 

 

 

 

YUKOS, ADR

 

 

30,500

 

 

3,965,930

Singapore -- 0.3%

 

 

 

 

 

 

 

Technologies -- 0.3%

 

 

 

 

 

 

 

Singapore Technologies Engineering Ltd.

 

 

794,400

 

 

789,928

South Africa -- 0.7%

 

 

 

 

 

 

 

Paper & Forest Products -- 0.7%

 

 

 

 

 

 

 

Sappi Ltd.

 

 

178,400

 

 

2,150,520

Sweden -- 4.3%

 

 

 

 

 

 

 

Commercials Services -- 0.7%

 

 

 

 

 

 

 

(4)Alfa Laval AB

 

 

214,700

 

 

1,942,015

 

Household Product/Wares -- 1.0%

 

 

 

 

 

 

 

(1)Electrolux AB, Class B

 

 

181,800

 

 

3,124,409

 

Industrial Services -- 2.1%

 

 

 

 

 

 

 

Sandvik AB

 

 

136,600

 

 

3,168,901

 

Atlas Copco AB, Class A

 

 

156,710

 

 

3,235,191

 

 

 

 

 

 

 

6,404,092

 

Paper & Forest Products -- 0.5%

 

 

 

 

 

 

 

Svenska Cellulosa AB, Class B

 

 

43,290

 

 

1,476,445

 

Total Sweden

 

 

 

 

 

12,946,961

Switzerland -- 7.2%

 

 

 

 

 

 

 

Banks -- 1.8%

 

 

 

 

 

 

 

(1)UBS AG

 

 

115,390

 

 

5,436,541

 

Beverages & Foods -- 2.1%

 

 

 

 

 

 

 

(1)Nestle SA

 

 

28,770

 

 

6,173,491

 

Construction Materials -- 1.0%

 

 

 

 

 

 

 

(1)Holcim Ltd.

 

 

16,170

 

 

3,006,417

 

Insurance -- 0.9%

 

 

 

 

 

 

 

(1)Swiss Re

 

 

37,540

 

 

2,651,766

 

Pharmaceuticals & Healthcare -- 1.4%

 

 

 

 

 

 

 

(1)Novartis AG

 

 

107,030

 

$

4,343,681

 

Total Switzerland

 

 

 

 

 

21,611,896

Taiwan -- 0.5%

 

 

 

 

 

 

 

Electrical Equipment -- 0.5%

 

 

 

 

 

 

(4)Taiwan Semiconductor Manufacturing Co., ADR

 

 

198,800

 

 

1,624,196

United Kingdom -- 24.0%

 

 

 

 

 

 

 

Aerospace & Defense -- 1.2%

 

 

 

 

 

 

 

BAE Systems PLC

 

 

762,100

 

 

3,609,512

 

Banks -- 2.8%

 

 

 

 

 

 

 

Royal Bank of Scotland PLC, Edinburgh

 

 

225,500

 

 

5,385,519

 

Standard Chartered PLC

 

 

275,200

 

 

3,152,065

 

 

 

 

 

 

 

8,537,584

 

Beverages & Foods -- 1.8%

 

 

 

 

 

 

 

Diageo PLC

 

 

435,700

 

 

5,273,626

 

Containers & Metal/Glass -- 1.0%

 

 

 

 

 

 

 

Rexam PLC

 

 

427,500

 

 

2,951,114

 

Domestic & International Oil -- 1.1%

 

 

 

 

 

 

 

BP Amoco PLC

 

 

443,400

 

 

3,434,906

 

Gas Distribution -- 0.5%

 

 

 

 

 

 

 

BG Group PLC

 

 

336,900

 

 

1,405,319

 

Healthcare Equipment & Supplies -- 0.9%

 

 

 

 

 

 

 

Smith & Nephew PLC

 

 

492,800

 

 

2,841,267

 

Hotels & Motels -- 0.9%

 

 

 

 

 

 

 

Six Continents PLC

 

 

275,800

 

 

2,591,182

 

Leisure & Recreation -- 1.4%

 

 

 

 

 

 

 

Hilton Group PLC

 

 

596,900

 

 

1,764,615

 

(4)P&O Princess Cruises PLC

 

 

364,300

 

 

2,368,228

 

 

 

 

 

 

 

4,132,843

 

Manufacturing -- 0.5%

 

 

 

 

 

 

 

Smiths Group PLC

 

 

130,700

 

 

1,476,772

 

Media -- 0.5%

 

 

 

 

 

 

 

WPP Group PLC

 

 

203,900

 

 

1,502,240
               

 

Description

Shares or
Principal
Amount

Value

 

Metals & Mining -- 0.7%

 

 

 

 

 

 

 

Rio Tinto PLC

 

 

111,800

 

$

1,962,320

 

MultiMedia -- 1.6%

 

 

 

 

 

 

 

Pearson PLC

 

 

260,200

 

 

2,585,576

 

Reed International PLC

 

 

260,800

 

 

2,329,155

 

 

 

 

 

 

 

4,914,731

 

Pharmaceuticals & Healthcare -- 2.2%

 

 

 

 

 

 

 

(4)GlaxoSmithKline PLC

 

 

359,744

 

 

6,770,834

 

Retail -- 4.4%

 

 

 

 

 

 

 

Kingfisher PLC

 

 

2,976,018

 

 

9,799,867

 

Next PLC

 

 

258,900

 

 

3,378,117

 

 

 

 

 

 

 

13,177,984

 

Telecommunications -- 1.6%

 

 

 

 

 

 

 

Vodafone Group PLC

 

 

2,953,721

 

 

4,731,784

 

Tobacco -- 0.9%

 

 

 

 

 

 

 

British American Tobacco PLC

 

 

242,600

 

 

2,819,978

 

Total United Kingdom

 

 

 

 

 

72,133,996

Total Common Stocks (identified cost $314,559,418)

 

 

 

 

 

303,578,274

(3)Repurchase Agreement -- 0.5%

 

 

 

 

 

 

 

State Street Corp., 0.85%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

1,548,000

 

 

1,548,000

Total Investments (identified cost $316,107,418)

 

 

 

 

$

305,126,274

 

 
 

 

 

Government Income Fund

 

Description

Principal
Amount

Value

Asset-Backed Securities -- 4.6%

 

 

 

 

 

 

 

Green Tree Home Equity Loan Trust (Series 1998-B), Class B1, 7.810%, 11/15/2029

   

$

6,000,000

    

$

6,232,399

 

Greenwich Capital Acceptance (Series 1995-BA1), Class A4, 7.150%, 8/10/2020

 

 

10,643,000

 

 

11,460,286

Total Asset-Backed Securities (identified cost $16,665,899)

 

 

 

 

 

17,692,685

Collateralized Mortgage Obligations -- 19.9%

 

 

 

 

 

 

 

(5)(6)Federal Home Loan Mortgage Corp., 1.940%, 9/25/2002, REMIC
(Series T-32-A1)

 

 

14,700,835

 

 

14,682,225

 

(5)(6)Federal Home Loan Mortgage Corp., 2.563%, 9/15/2002, REMIC (Series 1624-FA)

 

$

2,724,375

 

$

2,730,494

 

Federal Home Loan Mortgage Corp., 6.250%, 9/15/2023, REMIC (Series 1666H)

 

 

15,000,000

 

 

16,231,070

 

(6)Federal Home Loan Mortgage Corp., 6.500%, 10/15/2016, REMIC
(Series 1702-PK)

 

 

10,000,000

 

 

10,771,873

 

(5)(6)Federal National Mortgage Association, 2.060%, 9/25/2002, REMIC (Series 2001-25-FA)

 

 

20,940,290

 

 

20,729,455

 

Federal National Mortgage Association, 6.022%, 11/25/2010

 

 

10,000,000

 

 

10,913,488

Total Collateralized Mortgage Obligations (identified cost $71,515,992)

 

 

 

 

 

76,058,605

Corporate Bonds -- 1.8%

 

 

 

 

 

 

 

(5)HSB Group, Inc., FRN, 2.770%, 10/15/2002

 

 

3,000,000

 

 

2,828,094

 

(5)TXU Gas Capital, FRN, 3.210%, 10/1/2002

 

 

5,000,000

 

 

3,960,795

Total Corporate Bonds (identified cost $7,909,300)

 

 

 

 

 

6,788,889

Mortgage Backed Securities -- 66.4%

 

 

 

 

Federal Home Loan Mortgage Corporation -- 18.1%

 

 

 

 

 

 

 

5.000%, 8/1/2014

 

 

12,529,301

 

 

12,705,210

 

6.000%, 6/15/2011

 

 

5,000,000

 

 

5,520,705

 

6.500%, 9/1/2016

 

 

4,203,886

 

 

4,399,461

 

(1)6.500%, 2/1/2031

 

 

16,371,473

 

 

16,948,434

 

(7)6.500%, 10/1/2032

 

 

15,000,000

 

 

15,501,600

 

7.000%, 11/1/2009

 

 

2,156,918

 

 

2,284,185

 

7.500%, 9/1/2013

 

 

780,814

 

 

831,900

 

7.500%, 4/1/2024

 

 

2,138,333

 

 

2,267,806

 

7.500%, 4/1/2027

 

 

1,689,981

 

 

1,787,085

 

8.000%, 8/1/2030

 

 

2,843,753

 

 

3,030,272

 

8.500%, 9/1/2024

 

 

863,680

 

 

935,672

 

9.000%, 6/1/2019

 

 

1,308,992

 

 

1,448,281

 

9.500%, 2/1/2025

 

 

1,225,484

 

 

1,367,597

 

 

 

 

 

 

 

69,028,208

 

Federal National Mortgage Association -- 26.5%

 

 

 

 

 

 

 

6.000%, 9/1/2013

 

 

9,644,061

 

 

10,054,375

 

6.500%, 9/1/2016

 

 

4,370,818

 

 

4,575,955

 

6.500%, 9/1/2016

 

 

8,384,476

 

 

8,777,987

 

6.500%, 12/1/2031

 

 

4,563,091

 

 

4,718,694

 

(7)6.500%, 11/1/2032

 

 

25,000,000

 

 

25,742,200

 

7.000%, 12/1/2010

 

 

3,801,797

 

 

4,030,652

 

7.000%, 3/1/2029

 

$

4,434,074

 

$

4,624,852

 

7.000%, 7/1/2029

 

 

9,781,626

 

 

10,202,485

 

7.000%, 2/1/2030

 

 

8,160,227

 

 

8,511,325

 

(1)7.500%, 12/1/2009

 

 

6,297,098

 

 

6,734,252

 

(6)7.500%, 10/1/2030

 

 

4,388,749

 

 

4,622,949

 

8.000%, 10/1/2028

 

 

4,733,011

 

 

5,088,822

 

8.000%, 4/1/2030

 

 

3,231,734

 

 

3,444,679

 

 

 

 

 

 

 

101,129,227

 

Government National Mortgage Association -- 21.8%

 

 

 

 

 

6.500%, 12/15/2029

 

 

4,968,491

 

 

5,169,908

 

(7)6.500%, 10/1/2032

 

 

20,000,000

 

 

20,737,600

 

(1)7.000%, 4/15/2029

 

 

6,413,460

 

 

6,723,170

 

(1)7.000%, 5/15/2029

 

 

4,374,255

 

 

4,584,362

 

(1)7.000%, 6/15/2029

 

 

6,513,871

 

 

6,826,749

 

(1)7.000%, 8/15/2031

 

 

5,747,841

 

 

6,021,863

 

(1)7.500%, 8/15/2025

 

 

8,127,315

 

 

8,638,882

 

(1)7.500%, 8/15/2025

 

 

1,802,535

 

 

1,917,957

 

(1)7.500%, 12/15/2025

 

 

6,422,391

 

 

6,826,644

 

(1)7.500%, 2/15/2027

 

 

8,934,626

 

 

9,466,695

 

(1)8.500%, 6/15/2010

 

 

1,652,729

 

 

1,800,833

 

(1)9.000%, 11/15/2009

 

 

2,699,988

 

 

2,924,537

 

(1)9.000%, 1/15/2010

 

 

849,779

 

 

927,682

 

(1)9.500%, 10/15/2024

 

 

531,137

 

 

599,267

 

 

 

 

 

 

 

83,166,149

Total Mortgage Backed Securities (identified cost $241,770,303)

 

 

 

 

 

253,323,584

U.S. Treasury Notes -- 7.9%

 

 

 

 

 

 

 

4.375%, 8/15/2012

 

 

19,000,000

 

 

19,367,384

 

(1)4.875%, 2/15/2012

 

 

10,000,000

 

 

10,592,970

Total U.S. Treasury Notes (identified cost $29,238,828)

 

 

 

 

 

29,960,354

Total Investments in Securities (identified cost $367,100,322)

 

 

 

 

 

383,824,117

(3)Repurchase Agreements -- 15.3%

 

 

 

 

Bear Stearns Co., Inc., 1.800%, dated 8/1/2002, due 9/3/2002

 

 

10,000,000

 

 

10,000,000

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002

 

 

48,385,876

 

 

48,385,876

Total Repurchase Agreements (at amortized cost)

 

 

 

 

 

58,385,876

Total Investments (identified cost $425,486,198)

 

 

 

 

$

442,209,993

Intermediate Bond Fund

 

Description

   

Principal
Amount

    

Value

Asset-Backed Securities -- 8.5%

 

 

 

 

 

 

 

Citibank Credit Card Issuance Trust, (Series 2002-A1), Class A1, 4.950%, 2/9/2009

 

$

6,000,000

 

$

6,310,545

 

Citibank Credit Card Master Trust I, (Series 1999-7), Class A, 6.650%, 11/15/2006

 

 

5,000,000

 

 

5,421,882

 

(5)(8)(9)DLJ Commercial Mortgage Corp., (Series 1998-STF2), Class A1, 2.469%, 9/5/2002

 

 

715,169

 

 

713,939

 

(1)DaimlerChrysler Auto Trust, (Series 2000-C) Class A3, 6.820%, 9/6/2004

 

 

3,808,618

 

 

3,881,194

 

First USA Credit Card Master Trust, (Series 1998-9), Class A, 5.280%, 9/18/2006

 

 

7,750,000

 

 

8,073,944

 

Ford Credit Auto Owner Trust, (Series 2000-G), Class A4, 6.620%, 7/15/2004

 

 

5,918,545

 

 

6,050,204

 

Green Tree Home Equity Loan Trust, (Series 1998-B), Class B1, 7.810%, 11/15/2029

 

 

7,000,000

 

 

7,271,132

 

J.P. Morgan Commercial Mortgage Finance Corp., (Series 1997-C5), Class A2, 7.069%, 9/15/2029

 

 

6,760,314

 

 

7,266,747

 

(8)(9)Pegasus Aviation Lease Securitization, (Series 1999-1A), Class A1, 6.300%, 3/25/2029

 

 

1,939,635

 

 

1,844,029

 

(8)(9)Systems 2001 Asset Trust, Pass Thru Cert., 6.664%, 9/15/2013

 

 

6,344,763

 

 

6,796,140

Total Asset-Backed Securities (identified cost $51,341,322)

 

 

 

 

 

53,629,756

Collateralized Mortgage Obligations -- 4.9%

 

 

 

 

 

 

 

(8)(9)Criimi Mae CMBS Corp., (Series 1998-1), Class A2, 6.009%, 2/20/2005

 

 

5,000,000

 

 

5,301,367

 

(8)(9)Criimi Mae CMBS Corp., (Series 1998-1), Class A3, 6.306%, 6/20/2030

 

 

6,000,000

 

 

6,416,189

 

Fannie Mae, (Series 1993-137), Class PH, 6.550%, 12/25/2021

 

 

7,000,000

 

 

7,194,550

 

Federal Home Loan Mortgage Corp., (Series 1829), Class H, 6.500%, 10/15/2021

 

 

1,117,081

 

 

1,121,661

 

Government National Mortgage Association, (Series 2000-12), Class AC, 7.500%, 11/16/2027

 

 

2,170,334

 

 

2,219,720

 

Government National Mortgage Association, (Series 2001-5), Class PK, 5.950%, 7/20/2024

 

$

7,118,965

 

$

7,277,632

 

(8)(9)Prudential Home Mortgage Securities, (Series 1993-H), Class 2B, 6.751%, 9/28/2008

 

 

1,465,454

 

 

1,513,103

Total Collateralized Mortgage Obligations (identified cost $29,934,161)

 

 

 

 

 

31,044,222

Corporate Bonds & Notes -- 54.6%

 

 

 

 

Automotive & Related -- 8.8%

 

 

 

 

 

 

 

Ford Motor Credit Co., Note, 6.125%, 3/20/2004

 

 

8,000,000

 

 

8,054,024

 

(1)Ford Motor Credit Co., Note, 6.500%, 1/25/2007

 

 

4,000,000

 

 

3,943,856

 

(1)Ford Motor Credit Co., Note, 6.700%, 7/16/2004

 

 

7,000,000

 

 

7,122,850

 

Ford Motor Credit Co., Note, 7.375%, 10/28/2009

 

 

485,000

 

 

475,349

 

Ford Motor Credit Co., Note, 7.750%, 3/15/2005

 

 

5,000,000

 

 

5,174,645

 

General Motors Acceptance Corp., Note, 6.125%, 9/15/2006

 

 

5,000,000

 

 

5,049,255

 

(1)General Motors Acceptance Corp., Note, 6.380%, 1/30/2004

 

 

3,000,000

 

 

3,074,772

 

(1)General Motors Acceptance Corp., Note, 6.875%, 9/15/2011

 

 

7,000,000

 

 

6,985,251

 

(1)General Motors Acceptance Corp., Note, 6.875%, 8/28/2012)

 

 

5,000,000

 

 

4,943,225

 

General Motors Acceptance Corp., Unsecd. Note, 7.000%, 6/6/2003

 

 

6,000,000

 

 

6,158,802

 

(1)General Motors Corp., Note, 7.200%, 1/15/2011

 

 

5,000,000

 

 

5,107,805

 

 

 

 

 

 

 

56,089,834

 

Banks -- 5.3%

 

 

 

 

 

 

 

(1)Bank One Corp., Sub. Note, 7.875%, 8/1/2010

 

 

5,000,000

 

 

5,900,860

 

Citicorp, Sub. Note, (Series F), 6.375%, 11/15/2008

 

 

7,000,000

 

 

7,571,914

 

Citigroup, Inc., Note, 5.750%, 5/10/2006

 

 

5,000,000

 

 

5,295,745

 

Corestates Capital, Company Guarantee, 6.750%, 11/15/2006

 

 

5,790,000

 

 

6,388,535

 

(1)J.P. Morgan Chase & Co., Note, 5.250%, 5/30/2007

 

 

8,000,000

 

 

8,244,304

 

 

 

 

 

 

 

33,401,358

 

Beverages & Foods -- 1.9%

 

 

 

 

 

 

 

Anheuser-Busch Cos., Inc., Deb., 9.000%, 12/1/2009

 

$

5,000,000

 

$

6,377,490

 

(1)The Kroger Co., Company Guarantee, 6.750%, 4/15/2012

 

 

5,000,000

 

 

5,401,215

 

 

 

 

 

 

 

11,778,705

 

Broker/Dealers -- 3.7%

 

 

 

 

 

 

 

Goldman Sachs Group, Inc., Bond, 6.875%, 1/15/2011

 

 

2,000,000

 

 

2,177,580

 

Lehman Brothers, Inc., Note, 6.250%, 5/15/2006

 

 

1,000,000

 

 

1,069,477

 

Merrill Lynch & Co., Inc., Note, (Series MTNB), 5.350%, 6/15/2004

 

 

6,500,000

 

 

6,779,734

 

(1)Morgan Stanley, Note, 6.600%, 4/1/2012

 

 

7,000,000

 

 

7,467,782

 

PaineWebber Group, Inc., Note, 6.450%, 12/1/2003

 

 

6,000,000

 

 

6,326,136

 

 

 

 

 

 

 

23,820,709

 

Chemicals -- 0.6%

 

 

 

 

 

 

 

(1)(8)(9)Dow Chemical Co., Note, 5.250%, 5/14/2004

 

 

3,500,000

 

 

3,578,138

 

Construction Equipment -- 0.3%

 

 

 

 

 

 

 

CRH America, Inc., Note, 6.950%, 3/15/2012

 

 

2,000,000

 

 

2,204,216

 

Consumer Cyclical -- 0.3%

 

 

 

 

 

 

 

(1)Tyco International Group, Company Guarantee, 5.800%, 8/1/2006

 

 

2,500,000

 

 

2,114,615

 

Domestic & International Oil -- 2.3%

 

 

 

 

 

 

 

Conoco, Inc., Sr. Note, 6.350%, 4/15/2009

 

 

6,000,000

 

 

6,477,906

 

Occidental Petroleum Corp., Sr. Note, 6.500%, 4/1/2005

 

 

3,500,000

 

 

3,767,971

 

PanCanadian Energy Corp., Bond, 6.300%, 11/1/2011

 

 

4,000,000

 

 

4,166,088

 

 

 

 

 

 

 

14,411,965

 

Federal National Mortgage Association -- 1.8%

 

 

 

 

 

 

 

Fannie Mae, Note, 6.625%, 10/15/2007

 

 

10,000,000

 

 

11,379,040

 

Financial Services -- 11.7%

 

 

 

 

 

 

 

(1)Countrywide Home Loans, Inc., Company Guarantee, (Series MTNK), 5.625%, 5/15/2007

 

 

7,000,000

 

 

7,231,861

 

(5)(8)(9)Credit Suisse, London, Sub. Note, 7.900%, 5/1/2007

 

 

5,000,000

 

 

5,427,165

 

EOP Operating LP, Note, 7.375%, 11/15/2003

 

$

4,000,000

 

$

4,189,872

 

General Electric Capital Corp., Note, (Series A), 6.500%, 12/10/2007

 

 

5,000,000

 

 

5,565,985

 

General Electric Capital Corp., Note, (Series MTNA), 6.800%, 11/1/2005

 

 

4,000,000

 

 

4,410,764

 

(1)Household Finance Corp., Note, 7.000%, 5/15/2012

 

 

6,000,000

 

 

6,039,234

 

Household Netherlands BV, Company Guarantee, 6.200%, 12/1/2003

 

 

4,000,000

 

 

4,081,680

 

International Lease Finance Corp., Note, 5.625%, 6/1/2007

 

 

5,000,000

 

 

5,115,585

 

(1)(5)MBNA Global Capital Securities, Jr. Sub. Deb., (Series B), 2.623%, 11/1/2002

 

 

5,000,000

 

 

3,442,335

 

(1)National Rural Utilities Cooperative Finance Corp., Note, 5.75%, 8/28/2009

 

 

3,500,000

 

 

3,503,248

 

SLM Corporation, Note, (Series MTNA), 5.625%, 4/10/2007

 

 

5,000,000

 

 

5,345,735

 

(5)UBS Preferred Funding Trust II, Bank Guarantee, 8.622%, 10/1/2002

 

 

7,000,000

 

 

8,288,308

 

Wells Fargo Financial, Inc., Note, 4.875%, 6/12/2007

 

 

5,000,000

 

 

5,187,610

 

Wells Fargo Financial, Inc., Note, 5.875%, 8/15/2008

 

 

6,000,000

 

 

6,447,588

 

 

 

 

 

 

 

74,276,970

 

Forest Products & Paper -- 0.4%

 

 

 

 

 

 

 

Reed Elsevier, Capital, Company Guarantee, 6.125%, 8/1/2006

 

 

2,500,000

 

 

2,648,525

 

Household Product/Wares -- 0.9%

 

 

 

 

 

 

 

(1)Procter & Gamble Co., Unsub., 6.600%, 12/15/2004

 

 

5,000,000

 

 

5,428,760

 

Insurance -- 4.7%

 

 

 

 

 

 

 

(8)(9)AIG SunAmerica Global Financial, Note, 5.850%, 8/1/2008

 

 

7,000,000

 

 

7,494,739

 

(8)(9)Allstate Financial Global, Note, 7.125%, 9/26/2005

 

 

5,500,000

 

 

6,093,522

 

(5)HSB Group, Inc., Company Guarantee, (Series B), 2.770%, 10/15/2002

 

 

4,000,000

 

 

3,770,792

 

(8)(9)John Hancock Financial Services, Inc., 6.500%, 3/1/2011

 

 

3,500,000

 

 

3,691,149

 

MGIC Investment Corp., Sr. Note, 6.00%, 3/15/2007

 

 

3,000,000

 

 

3,218,499

 

Prudential Funding Corp., Note, (Series MTN), 6.600%, 5/15/2008

 

$

5,000,000

 

$

5,336,375

 

 

 

 

 

 

 

29,605,076

 

Media -- 2.4%

 

 

 

 

 

 

 

(1)AOL Time Warner, Inc., Note, 6.125%, 4/15/2006

 

 

4,000,000

 

 

3,703,788

 

(1)AOL Time Warner, Inc., Note, 6.875%, 5/1/2012

 

 

3,000,000

 

 

2,708,313

 

(1)Comcast Corp., Sr. Note, 6.750%, 1/30/2011

 

 

3,000,000

 

 

2,761,395

 

(1)Viacom, Inc., Note, 5.625%, 5/1/2007

 

 

6,000,000

 

 

6,273,840

 

 

 

 

 

 

 

15,447,336

 

Metals -- 0.3%

 

 

 

 

 

 

 

(1)Alcoa, Inc., Note, 5.875%, 6/1/2006

 

 

1,965,000

 

 

2,110,872

 

Telecommunications -- 4.1%

 

 

 

 

 

 

 

AT&T Wireless Services, Inc., Note, 8.125%, 5/1/2012

 

 

2,000,000

 

 

1,713,232

 

BT Group PLC, Note, 7.875%, 12/15/2005

 

 

5,000,000

 

 

5,480,015

 

(1)BT Group PLC, Note, 8.375%, 12/15/2010

 

 

5,000,000

 

 

5,726,500

 

SBC Communications, Inc., Note, 5.875%, 8/15/2012

 

 

3,000,000

 

 

3,052,983

 

Telstra Corp. Ltd., Note, 6.375%, 4/1/2012

 

 

5,000,000

 

 

5,375,905

 

(1)(8)(9)Verizon Global Funding Corp., Note, 7.250%, 12/1/2010

 

 

3,000,000

 

 

2,997,681

 

Verizon Global Funding Corp., Note, 7.375%, 9/1/2012

 

 

2,000,000

 

 

1,995,092

 

 

 

 

 

 

 

26,341,408

 

Transportation -- 1.7%

 

 

 

 

 

 

 

American Trans Air, (Series 2001-1G), Pass Through Cert., 8.039%, 1/15/2016

 

 

4,658,802

 

 

4,608,302

 

Continental Airlines, Inc., Pass Through Cert., 6.541%, 9/15/2009

 

 

3,377,090

 

 

3,054,740

 

Delta Air Lines, Inc., Equipment Trust, (Series 1993-A2), 10.500%, 4/30/2016

 

 

4,000,000

 

 

3,425,020

 

 

 

 

 

 

 

11,088,062

 

Utilities-Electric -- 2.5%

 

 

 

 

 

 

 

Limestone Electronic Trust, Sr. Note, 8.625%, 3/15/2003

 

 

5,000,000

 

 

4,953,150

 

(8)(9)Pinnacle Partner, Sr. Note, 8.830%, 8/15/2004

 

 

3,000,000

 

 

2,791,695

 

(8)(9)Southern Power Co., Sr. Note, 6.25%, 7/15/2012

 

$

3,000,000

 

$

3,168,684

 

TransAlta Corp., Note, 6.750%, 7/15/2012

 

 

5,000,000

 

 

5,196,380

 

 

 

 

 

 

 

16,109,909

 

Utilities-Natural Gas -- 0.9%

 

 

 

 

(5)TXU Gas Capital I, Company Guarantee, 3.210%, 10/1/2002

 

 

7,000,000

 

 

5,545,113

Total Corporate Bonds & Notes (identified cost $339,682,222)

 

 

 

 

 

347,380,611

Government Agencies -- 8.7%

 

 

 

 

 

 

 

Federal Home Loan Bank -- 0.8%

 

 

 

 

 

 

 

5.430%, 11/17/2008

 

 

5,000,000

 

 

5,397,265

 

Federal National Mortgage Association -- 6.2%

 

 

 

 

 

 

 

5.500%, 2/15/2006

 

 

10,000,000

 

 

10,835,530

 

6.250%, 2/1/2011

 

 

16,000,000

 

 

17,444,032

 

7.000%, 7/15/2005

 

 

10,000,000

 

 

11,171,500

 

 

 

 

 

 

 

39,451,062

 

Tennessee Valley Authority -- 1.7%

 

 

 

 

 

 

 

5.625%, 1/18/2011

 

 

10,000,000

 

 

10,661,870

Total Government Agencies (identified cost $52,074,058)

 

 

 

 

 

55,510,197

Mortgage Backed Securities -- 7.9%

 

 

 

 

 

 

 

Federal Home Loan Mortgage Corporation -- 1.3%

 

 

 

 

 

 

(1)7.500%, 2/1/2031

 

 

5,578,686

 

 

5,877,907

 

(1)7.500%, 6/1/2031

 

 

2,036,164

 

 

2,145,392

 

 

 

 

 

 

 

8,023,299

 

Federal National Mortgage Association -- 4.5%

 

 

 

 

 

 

 

6.500%, 10/1/2031

 

 

14,365,225

 

 

14,855,084

 

(1)7.000%, 12/1/2015

 

 

8,123,133

 

 

8,601,515

 

7.635%, 8/1/2011

 

 

4,706,033

 

 

5,340,424

 

 

 

 

 

 

 

28,797,023

 

Government National Mortgage Association -- 2.1%

 

 

 

 

 

 

7.000%, 3/15/2032

 

 

13,043,158

 

 

13,664,561

Total Mortgage Backed Securities (identified cost $49,219,891)

 

 

 

 

50,484,883

U.S. Treasury Securities -- 8.0%

 

 

 

 

 

 

 

U.S. Treasury Notes -- 8.0%

 

 

 

 

 

 

 

(1)4.375%, 5/15/2007

 

$

3,000,000

 

$

3,160,197

 

4.375%, 8/15/2012

 

 

25,000,000

 

 

25,483,400

 

(1)4.875%, 2/15/2012

 

 

3,000,000

 

 

3,177,891

 

5.000%, 8/15/2011

 

 

500,000

 

 

535,001

 

6.000%, 8/15/2004

 

 

2,000,000

 

 

2,149,220

 

(1)7.250%, 5/15/2004

 

 

15,000,000

 

 

16,318,950

Total U.S. Treasury Securities (identified cost $50,041,621)

 

 

 

 

 

50,824,659

Total Investments in Securities (identified cost $572,293,275)

 

 

 

 

 

588,874,328

(3)Repurchase Agreement -- 6.5%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

 

41,098,877

 

 

41,098,877

Total Investments (identified cost $613,392,152)

 

 

 

 

$

629,973,205

Short-Term Income Fund

 

Description

   

Principal
Amount

    

Value

Asset-Backed Securities -- 9.2%

 

 

 

 

 

 

 

Citibank Credit Card Master Trust I 1998-9, Class A, 5.300%, 1/9/2006

 

$

1,220,000

 

$

1,270,727

 

(5)(8)(9)DLJ Commercial Mortgage Corp., Series 1998-ST2A, Class A1, 2.468%, 9/5/2002

 

 

231,715

 

 

231,317

 

Daimler Chrysler Auto Trust, Class A3, 6.820%, 9/6/2004

 

 

1,233,992

 

 

1,257,507

 

First Franklin Mortgage Loan Asset Backed Certificates, Series 2002-FF1, Class 1A2, 3.790%, 4/25/2032

 

 

1,600,000

 

 

1,617,454

 

Ford Credit Auto Owner Trust 2000-G, Class A4, 6.620%, 7/15/2004

 

 

684,860

 

 

700,095

 

Green Tree Home Equity Loan Trust, Series 1998-B, Class B1, 7.810%, 11/15/2029

 

 

3,000,000

 

 

3,116,199

 

Honda Auto Receivables Owner Trust, Series 2001-3, Class A4, 3.960%, 2/19/2007

 

 

1,300,000

 

 

1,334,406

 

(8)(9)Pegasus Aviation Lease Securitization, Series 1999-1A, Class A1, 6.300%, 3/25/2029

 

 

788,785

 

 

749,905

 

TMS Home Equity Trust, Series 1992-D2, Class A3, 7.550%, 1/15/2018

 

$

352,722

 

$

352,725

Total Asset-Backed Securities (identified cost $10,420,737)

 

 

 

 

 

10,630,335

Collateralized Mortgage Obligations -- 11.1%

 

 

 

 

 

 

 

Federal Home Loan Mortgage Corporation -- 2.9%

 

 

 

 

 

 

 

5.250%, 1/15/2010, Series 2368, Class TQ

 

 

1,620,000

 

 

1,653,281

 

5.500%, 5/15/2011, Series 2368, Class OC

 

 

1,620,000

 

 

1,680,867

 

 

 

 

 

 

 

3,334,148

 

Federal National Mortgage Association -- 2.2%

 

 

 

 

 

 

 

6.550%, 12/25/2021, Series 1993-137, Class PH

 

 

2,430,000

 

 

2,497,537

 

Government National Mortgage Association -- 1.9%

 

 

 

 

 

 

 

5.950%, 7/20/2024, Series 2001-5, Class PK

 

 

1,156,832

 

 

1,182,615

 

7.500%, 11/16/2027, Series 2000-12, Class AC

 

 

1,011,817

 

 

1,034,841

 

 

 

 

 

 

 

2,217,456

 

Other Financial -- 4.1%

 

 

 

 

 

 

 

(8)(9)Capital Asset Research Funding, Series 1997-A, Class A, 6.400%, 12/15/2004

 

 

456,528

 

 

456,528

 

(8)(9)Criimi Mae CMBS Corp., Series 1998-1, Class A2, 6.009%, 6/20/2030

 

 

3,240,000

 

 

3,435,286

 

Securitized Asset Sales, Inc., Series 1995-4, Class A5, 7.250%, 11/25/2025

 

 

793,100

 

 

799,473

 

 

 

 

 

 

 

4,691,287

Total Collateralized Mortgage Obligations (identified cost $12,462,646)

 

 

 

 

 

12,740,428

Mortgage Backed-Pass Through Securities -- 7.8%

 

 

 

 

 

 

 

Federal Home Loan Mortgage Corporation -- 0.5%

 

 

 

 

 

 

 

9.000%, 7/1/2014

 

 

114,983

 

 

125,243

 

11.000%, 8/1/2019

 

 

404,500

 

 

458,826

 

 

 

 

 

 

 

584,069

 

Federal National Mortgage Association -- 7.0%

 

 

 

 

 

 

 

7.000%, 12/1/2015

 

 

2,193,814

 

 

2,323,010

 

7.500%, 9/1/2015

 

 

1,910,949

 

 

2,043,644

 

8.000%, 8/1/2007

 

 

23,511

 

 

23,634

 

8.000%, 5/1/2008

 

$

439,313

 

$

462,597

 

9.000%, 7/1/2009

 

 

198,921

 

 

215,854

 

9.000%, 1/1/2015

 

 

116,607

 

 

128,753

 

9.500%, 12/1/2024

 

 

267,272

 

 

297,456

 

9.500%, 1/1/2025

 

 

475,858

 

 

529,598

 

9.500%, 1/1/2025

 

 

405,948

 

 

451,683

 

9.500%, 1/1/2025

 

 

297,731

 

 

331,355

 

10.000%, 7/1/2020

 

 

257,711

 

 

296,128

 

10.500%, 1/1/2022

 

 

213,943

 

 

246,416

 

11.000%, 12/1/2015

 

 

629,669

 

 

713,065

 

 

 

 

 

 

 

8,063,193

 

Government National Mortgage Association -- 0.3%

 

 

 

 

 

 

 

9.000%, 12/15/2019

 

 

336,111

 

 

373,247

Total Mortgage Backed-Pass Through Securities (identified cost $8,741,549)

 

 

 

 

 

9,020,509

Corporate Bonds & Notes -- 37.8%

 

 

 

 

 

 

 

Automotive & Related -- 5.0%

 

 

 

 

 

 

 

Ford Motor Credit Co., Note, 7.500%, 6/15/2003

 

 

1,220,000

 

 

1,255,173

 

Ford Motor Credit Co., Sr. Note, 6.125%, 3/20/2004

 

 

1,620,000

 

 

1,630,940

 

General Motors Acceptance Corp., Note, 6.380%, 1/30/2004

 

 

1,620,000

 

 

1,660,377

 

General Motors Acceptance Corp., Sr. Note, 5.750%, 11/10/2003

 

 

1,220,000

 

 

1,240,816

 

 

 

 

 

 

 

5,787,306

 

Banks -- 2.2%

 

 

 

 

 

 

 

First Chicago Corp., Sub. Note, 6.875%, 6/15/2003

 

 

1,220,000

 

 

1,265,045

 

NationsBank Corp., 6.125%, 7/15/2004

 

 

1,220,000

 

 

1,294,097

 

 

 

 

 

 

 

2,559,142

 

Broker/Dealers -- 3.9%

 

 

 

 

 

 

 

Goldman Sachs Group, Inc., Bond, 7.625%, 8/17/2005

 

 

810,000

 

 

898,110

 

Merrill Lynch & Co., Inc., Note, 6.800%, 11/3/2003

 

 

810,000

 

 

849,875

 

Merrill Lynch & Co., Inc., Note, Series MTNB, 5.350%, 6/15/2004

 

 

1,050,000

 

 

1,095,188

 

Morgan Stanley, Dean Witter & Co., Unsub., 6.100%, 4/15/2006

 

 

810,000

 

 

857,342

 

PaineWebber Group, Inc., Note, 6.450%, 12/1/2003

 

 

810,000

 

 

854,028

 

 

 

 

 

 

 

4,554,543

 

Chemicals -- 1.4%

 

 

 

 

 

 

 

(8)(9)Dow Chemical Co., Note, Series 144A, 5.250%, 5/14/2004

 

$

1,620,000

 

$

1,656,166

 

Domestic & International Oil -- 0.9%

 

 

 

 

 

 

 

Occidental Petroleum Corp., 6.500%, 4/1/2005

 

 

970,000

 

 

1,044,266

 

Electric -- 1.6%

 

 

 

 

 

 

 

(5)TXU Gas Capital, 3.210%, 10/1/2002

 

 

2,430,000

 

 

1,924,946

 

Energy -- 0.3%

 

 

 

 

 

 

 

(4)(8)(9)Osprey Trust, Sr. Secd. Note, 8.310%, 1/15/2003

 

 

2,000,000

 

 

330,000

 

Equipment -- 0.9%

 

 

 

 

 

 

 

(8)(9)Regional Jet Equipment Trust, Note, Series 144A, 7.771%, 9/5/2004

 

 

1,010,196

 

 

1,028,162

 

Federal Home Loan Mortgage Corp. -- 2.8%

 

 

 

 

 

 

 

Federal Home Loan Mortgage Corp., Note, 7.375%, 5/15/2003

 

 

3,050,000

 

 

3,169,932

 

Financial Services -- 3.0%

 

 

 

 

 

 

 

Boeing Capital Corp., Sr. Note, 7.100%, 9/27/2005

 

 

610,000

 

 

657,390

 

Credit Suisse First Boston USA, Inc., Note, 5.875%, 8/1/2006

 

 

1,220,000

 

 

1,287,843

 

MBNA Global Capital Securities, Jr. Sub. Deb., 2.623%, 2/1/2027

 

 

1,000,000

 

 

688,467

 

Salomon Smith Barney Holdings, Inc., Note, 6.250%, 5/15/2003

 

 

810,000

 

 

833,598

 

 

 

 

 

 

 

3,467,298

 

Forest Products & Paper -- 0.5%

 

 

 

 

 

 

 

Reed Elsevier, Inc., Company Guarantee, 6.125%, 8/1/2006

 

 

490,000

 

 

519,111

 

Healthcare -- 1.5%

 

 

 

 

 

 

 

Abbott Laboratories, Note, 5.125%, 7/1/2004

 

 

1,620,000

 

 

1,692,011

 

Industrial Services -- 0.3%

 

 

 

 

 

 

 

Tyco International Group, Note, 5.800%, 8/1/2006

 

 

410,000

 

 

346,797

 

Insurance -- 3.8%

 

 

 

 

 

 

 

(8)(9)Allstate Financial Global, Note, 7.125%, 9/26/2005

 

 

750,000

 

 

830,935

 

HSB Group, Inc., Company Guarantee, 2.770%, 7/15/2027

 

 

2,430,000

 

 

2,290,756

 

MGIC Investment Corp., Sr. Note, 7.500%, 10/15/2005

 

$

1,095,000

 

$

1,221,579

 

 

 

 

 

 

 

4,343,270

 

Leasing -- 2.0%

 

 

 

 

 

 

 

General Electric Capital Corp., Note, 5.000%, 6/15/2007

 

 

1,000,000

 

 

1,044,945

 

General Electric Capital Corp., Note, 5.375%, 4/23/2004

 

 

1,210,000

 

 

1,265,889

 

 

 

 

 

 

 

2,310,834

 

Media -- 2.3%

 

 

 

 

 

 

 

AOL Time Warner, Inc., Note, 6.125%, 4/15/2006

 

 

810,000

 

 

750,017

 

Gannett Co., Inc., Note, 4.950%, 4/1/2005

 

 

955,000

 

 

1,001,314

 

Walt Disney Co., 7.300%, 2/8/2005

 

 

810,000

 

 

869,145

 

 

 

 

 

 

 

2,620,476

 

Metals -- 0.6%

 

 

 

 

 

 

 

Alcoa, Inc., Note, 5.875%, 6/1/2006

 

 

620,000

 

 

666,026

 

Papers -- 0.9%

 

 

 

 

 

 

 

Weyerhaeuser Co., Unsecd. Note, 5.500%, 3/15/2005

 

 

1,010,000

 

 

1,045,703

 

Real Estate -- 0.7%

 

 

 

 

 

 

 

EOP Operating LP, Sr. Note, 6.375%, 2/15/2003

 

 

810,000

 

 

823,126

 

Telecommunications -- 1.8%

 

 

 

 

British Telecommunications PLC, Note, 7.875%, 12/15/2005

 

 

570,000

 

 

624,722

 

(8)(9)France Telecommunications, Note, Series 144A, 7.200%, 3/1/2006

 

 

570,000

 

 

591,922

 

(8)(9)Verizon Global Funding, Note, Series 144A, 6.750%, 12/1/2005

 

 

810,000

 

 

831,659

 

 

 

 

 

 

 

2,048,303

 

Utilities-Electric -- 1.4%

 

 

 

 

 

 

 

(8)(9)Limestone Electronic Trust, Sr. Note, 8.625%, 3/15/2003

 

 

1,620,000

 

 

1,604,821

Total Corporate Bonds & Notes (identified cost $44,845,746)

 

 

 

 

 

43,542,239

Government Agencies -- 31.0%

 

 

 

 

 

 

 

Federal Home Loan Bank -- 4.5%

 

 

 

 

Federal Home Loan Bank, Bond, 4.125%, 1/14/2005

 

 

5,000,000

 

 

5,192,160

 

Federal Home Loan Mortgage Corporation -- 11.7%

 

 

 

 

 

 

 

Federal Home Loan Mortgage Corp., Note, 5.250%, 2/15/2004

 

$

5,000,000

 

$

5,231,490

 

Federal Home Loan Mortgage Corp., Unsecd. Note, 3.250%, 11/15/2004

 

 

5,000,000

 

 

5,097,570

 

Federal Home Loan Mortgage Corp., Unsecd. Note, 4.250%, 6/15/2005

 

 

3,000,000

 

 

3,122,151

 

 

 

 

 

 

 

13,451,211

 

Federal National Mortgage Association -- 14.8%

 

 

 

 

 

 

 

Federal National Mortgage Association, Note, 3.125%, 11/15/2003

 

 

3,240,000

 

 

3,286,575

 

Federal National Mortgage Association, Note, 4.250%, 7/15/2007

 

 

4,500,000

 

 

4,645,755

 

Federal National Mortgage Association, Note, 5.125%, 2/13/2004

 

 

2,430,000

 

 

2,538,373

 

Federal National Mortgage Association, Note, 5.500%, 2/15/2006

 

 

6,000,000

 

 

6,501,318

 

 

 

 

 

 

 

16,972,021

Total Government Agencies (identified cost $34,794,799)

 

 

 

 

 

35,615,392

Notes-Variable -- 1.4%

 

 

 

 

 

 

 

Financial Services -- 1.4%

 

 

 

 

 

 

 

(5)(8)(9)Lehman Brothers Holdings, Inc., 2.197%, 9/3/2002 (identified cost $1,584,240)

 

 

1,600,000

 

 

1,600,000

Total Investments in Securities (identified cost $112,849,717)

 

 

 

 

 

113,148,903

(3)Repurchase Agreement -- 0.7%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

 

787,797

 

 

787,797

Total Investments (identified cost $113,637,514)

 

 

 

 

$

113,936,700

Money Market Fund

Description

   

Principal
Amount

   

Value

Certificate of Deposit -- 0.7%

 

 

 

 

 

 

 

Foreign Banks -- 0.7%

 

 

 

 

 

 

 

Canadian Imperial Bank of Commerce, NY, 2.500%, 12/27/2002

 

$

20,000,000

 

$

19,986,901

(10)Commercial Paper -- 28.0%

 

 

 

 

Asset-Backed -- 10.6%

 

 

 

 

 

 

 

(8)(9)Liquid Funding Ltd., 1.750% - 1.790%, 10/10/2002 - 10/28/2002

 

$

75,000,000

 

$

74,821,296

 

(8)(9)Scaldis Capital Ltd., 1.830%, 9/12/2002 -9/25/2002

 

 

57,002,000

 

 

56,965,138

 

(8)(9)Sigma Finance, Inc., (Guaranteed by Sigma Finance Corp.), 1.850%, 10/4/2002

 

 

35,000,000

 

 

34,940,967

 

(8)(9)Tannehill Capital Co., 1.790% - 1.825%, 9/18/2002 - 10/21/2002

 

 

75,000,000

 

 

74,892,756

 

(8)(9)World Omni Vehicle Leasing, Inc., 1.760% -1.770%, 9/10/2002 -9/17/2002

 

 

65,000,000

 

 

64,966,200

 

 

 

 

 

 

 

306,586,357

 

Electric -- 2.2%

 

 

 

 

 

 

 

(8)(9)Wisconsin Energy Corp., 1.880% - 1.900%, 9/18/2002 - 9/26/2002

 

 

64,200,000

 

 

64,126,978

 

Foreign Banks -- 2.5%

 

 

 

 

 

 

 

(8)(9)Depfa-Bank, 1.700%, 10/25/2002

 

 

40,000,000

 

 

39,898,000

 

Spintab-Swedmortgage AB, 1.810%, 10/7/2002

 

 

32,500,000

 

 

32,441,175

 

 

 

 

 

 

 

72,339,175

 

Healthcare -- 5.2%

 

 

 

 

 

 

 

Baxter International, Inc., 1.770% - 1.780%, 9/12/2002 - 10/15/2002

 

 

74,607,000

 

 

74,522,048

 

(8)(9)Wyeth, 1.880% - 1.900%, 9/5/2002 - 10/2/2002

 

 

75,000,000

 

 

74,934,380

 

 

 

 

 

 

 

149,456,428

 

Mining -- 2.3%

 

 

 

 

 

 

 

(8)(9)Rio Tinto Ltd., 1.710%, 11/7/2002 - 11/8/2002

 

 

66,301,000

 

 

66,088,041

 

Mortgage Banking -- 2.6%

 

 

 

 

 

 

 

Countrywide Home Loans, Inc., 1.820% - 1.840%, 9/4/2002 - 9/20/2002

 

 

75,000,000

 

 

74,968,139

 

Telecommunications -- 2.6%

 

 

 

 

 

(8)(9)Verizon Global Funding, 1.947%, 9/16/2002

 

 

75,000,000

 

 

74,996,592

Total Commercial Paper

 

 

 

 

 

808,561,710

Corporate Bonds -- 4.6%

 

 

 

 

 

 

 

Banks -- 0.5%

 

 

 

 

 

 

 

Wells Fargo & Co., 6.500%, 9/3/2002

 

$

13,500,000

 

$

13,502,000

 

Computer Services -- 1.0%

 

 

 

 

 

 

International Business Machines Corp., 5.800%, 9/9/2002

 

 

29,000,000

 

 

29,018,984

 

Healthcare -- 1.2%

 

 

 

 

 

 

 

(8)(9)Lilly (Eli) & Co., 4.226%, 3/22/2003

 

 

15,000,000

 

 

15,115,389

 

(8)(9)Merck & Co., Inc., 4.540%, 2/24/2003

 

 

20,000,000

 

 

20,204,198

 

 

 

 

 

 

 

35,319,587

 

Personal Credit -- 1.4%

 

 

 

 

(8)(9)BMW US Capital LLC, 4.248%, 6/7/2003

 

 

40,000,000

 

 

40,418,271

 

Telecommunications -- 0.5%

 

 

 

 

(8)(9)SBC Communications, Inc., 4.295%, 6/5/2003

 

15,000,000

 

 

15,172,347

Total Corporate Bonds

 

 

 

 

 

133,431,189

 

American Express Centurion Bank, DE, 1.760%, 9/14/2002

 

 

15,000,000

 

 

14,999,064

 

American Express Centurion Bank, DE, 1.767%, 9/12/2002

 

 

15,000,000

 

 

15,000,000

 

Bank One Corp., 1.970%, 11/14/2002

 

 

10,000,000

 

 

10,010,987

 

Bank One Corp., 1.980%, 11/15/2002

 

 

24,500,000

 

 

24,526,933

 

Bank One, Illinois, N.A., 1.967%, 9/17/2002

 

 

13,500,000

 

 

13,514,658

 

Bank One, N.A., 1.870%, 11/7/2002

 

 

10,000,000

 

 

10,004,407

 

First Union National Bank, 2.030%, 9/20/2002

 

 

45,000,000

 

 

45,023,838

 

J.P. Morgan Chase & Co., 1.935%, 10/30/2002

 

 

15,000,000

 

 

15,009,480

 

Mellon Financial Corp., 2.207%, 9/14/2002

 

 

51,100,000

 

 

51,107,358

 

 

 

 

 

 

 

199,196,725

 

Broker/Dealers -- 15.9%

 

 

 

 

 

 

 

(8)(9)Bank of America, 1.917%, 12/02/2002

 

 

75,000,000

 

 

75,000,000

 

(8)(9)Bear Stearns Cos., Inc., 1.906%, 12/5/2002

 

75,000,000

 

 

75,000,000

 

Credit Suisse First Boston USA, Inc., 1.847%, 9/17/2002

 

 

75,000,000

 

 

75,000,000

 

Goldman Sachs & Co., 1.850%, 9/30/2002

 

 

30,000,000

 

 

30,000,000

 

Goldman Sachs & Co., 2.047%, 9/17/2002

 

 

5,000,000

 

 

5,004,321

 

(8)(9)Goldman Sachs & Co., 2.090%, 10/3/2002

 

$

30,000,000

 

$

30,042,068

 

Goldman Sachs & Co., 2.227%, 9/17/2002

 

 

10,000,000

 

 

10,017,371

 

(8)(9)J.P. Morgan & Co., Inc., 1.830%, 10/01/2002

 

 

35,000,000

 

 

35,000,000

 

Merrill Lynch & Co., Inc., 1.827%, 9/12/2002

 

 

20,000,000

 

 

20,000,000

 

Merrill Lynch & Co., Inc., 2.010%, 10/30/2002

 

 

10,000,000

 

 

10,006,817

 

Merrill Lynch & Co., Inc., 2.012%, 11/5/2002

 

 

29,000,000

 

 

29,020,544

 

Merrill Lynch & Co., Inc., 2.092%, 11/5/2002

 

 

16,000,000

 

 

16,031,549

 

Morgan Stanley, 2.040%, 10/8/2002

 

 

48,525,000

 

 

48,585,448

 

 

 

 

 

 

 

458,708,118

 

Construction Equipment -- 2.6%

 

 

 

 

 

 

 

Caterpillar Financial Services Corp., 1.940%, 10/9/2002

 

 

75,000,000

 

 

75,000,000

 

Diversified Manufacturing -- 2.6%

 

 

 

 

 

 

 

(8)ABB Capital USA, 2.016%, 12/6/2002

 

 

75,000,000

 

 

75,000,000

 

Drugs -- 2.1%

 

 

 

 

 

 

 

(8)(9)Bayer Corp., 4.450%, 3/19/2003

 

 

60,000,000

 

 

60,481,525

 

Insurance -- 11.6%

 

 

 

 

 

 

 

(8)GE Life and Annuity Assurance Co., 1.930%, 10/22/2002

 

 

75,000,000

 

 

75,000,000

 

(8)(9)Jackson National Life Insurance Co., 1.800%, 11/1/2002

 

 

40,000,000

 

 

40,000,000

 

(8)(9)John Hancock, Global Funding II, 1.920%, 10/2/2002

 

 

8,000,000

 

 

8,004,284

 

(8)(9)John Hancock, Global Funding II, 2.037%, 9/16/2002

 

 

35,000,000

 

 

35,052,470

 

(8)(9)Metropolitan Life Insurance Co., 1.888%, 11/3/2002

 

 

50,000,000

 

 

50,000,000

 

(8)Monumental Life Insurance Co., 1.930%, 10/1/2002

 

 

25,000,000

 

 

25,000,000

 

(8)Monumental Life Insurance Co., 1.920%, 10/1/2002

 

 

10,000,000

 

 

10,000,000

 

(8)Monumental Life Insurance Co., 2.010%, 10/1/2002

 

$

40,000,000

 

$

40,000,000

 

(8)Travelers Insurance Co., 1.882%, 11/1/2002

 

 

50,000,000

 

 

50,000,000

 

 

 

 

 

 

 

333,056,754

 

Mortgage Banking -- 1.7%

 

 

 

 

 

 

(8)(9)Northern Rock PLC, 1.750%, 11/14/2002

 

 

50,000,000

 

 

50,000,000

 

Other Consumer Non-Durables -- 2.5%

 

 

 

 

 

 

 

(8)(9)Unilever Capital Corp., 1.974%, 10/24/2002

 

 

71,110,000

 

 

71,128,398

 

Personal Credit -- 6.8%

 

 

 

 

 

 

 

American Express Credit Corp., 1.810%, 9/26/2002

 

 

45,000,000

 

 

45,000,000

 

(8)(9)American Honda Finance Corp., 1.830%, 10/22/2002

 

 

50,000,000

 

 

50,000,000

 

(8)(9)American Honda Finance Corp., 1.860%, 9/12/2002

 

 

25,000,000

 

 

25,000,000

 

Associates Corp. of North America, 1.940%, 9/26/2002

 

 

50,000,000

 

 

50,000,000

 

BMW US Capital LLC, 1.867%, 11/12/2002

 

 

10,000,000

 

 

9,999,541

 

Household Finance Corp., 1.890%, 9/13/2002

 

 

14,500,000

 

 

14,500,000

 

 

 

 

 

 

 

194,499,541

 

Student Loan -- 2.6%

 

 

 

 

 

 

 

USA Education, Inc., 1.937%, 9/16/2002

 

 

75,000,000

 

 

75,000,000

 

Telecommunications -- 3.8%

 

 

 

 

 

BellSouth Telecommunications, Inc., 1.907%, 12/4/2002

 

 

75,000,000

 

 

75,000,000

 

SBC Communications, Inc., 1.857%, 9/16/2002

 

 

35,000,000

 

 

35,000,000

 

 

 

 

 

 

 

110,000,000

Total Variable-Rate Notes

1,702,071,061
             

Description

Shares

Value

Mutual Funds -- 0.1%

 

 

 

 

 

 

 

American Select Cash Reserve Fund

 

 

1,155,801

 

$

1,155,801

 

Dreyfus Cash Management Fund

 

 

1,721,186

 

 

1,721,186

 

Goldman Sachs Financial Square Money Market Fund

 

 

1,004,029

 

 

1,004,029

Total Mutual Funds (Shares at net asset value)

 

 

 

 

 

3,881,016
             

Description

Principal
Amount

Value

(3)Repurchase Agreements -- 7.3%

 

 

 

 

Deutsche Bank Financial, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

$

35,000,000

 

$

35,000,000

 

First Union Capital Market, Inc., 1.940%, dated 8/30/2002, due 9/3/2002

 

 

85,000,000

 

 

85,000,000

 

Morgan Stanley Group, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

 

65,000,000

 

 

65,000,000

 

Salomon Smith Barney, Inc., 1.925%, dated 8/30/2002, due 9/3/2002

 

 

25,000,000

 

 

25,000,000

Total Repurchase Agreements

 

 

 

 

 

210,000,000

Total Investments (at amortized cost)

 

 

 

 

$

2,877,931,877

Notes to Portfolio Investments

Note: The categories of investments are shown as a percentage of net assets for each Fund at August 31, 2002.

(1) Certain shares or principal amounts are temporarily on loan to unaffiliated broker-dealers.

(2) Represents the initial deposit within a margin account used to ensure the Fund is able to satisfy the obligations of its outstanding long futures contracts.

(3) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on current market prices.

(4) Non-income producing.

(5) Current rate and next demand date shown.

(6) Securities held as collateral for dollar roll transactions.

(7) All or a portion of these securities are subject to dollar roll transactions.

(8) Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At August 31, 2002, these securities amounted to:

 
    

Amount
    

% of
Net Assets

Intermediate Bond Fund

 

$

57,827,540

 

9.1

%

Short-Term Income Fund

 

 

13,346,701

 

11.6

 

Money Market Fund

 

 

1,597,249,298

 

55.4

 

(9) Denotes a restricted security which has been deemed liquid by criteria approved by the Fund's Board of Directors.

(10) Each issue shows the rate of discount at the time of purchase.

 

The following acronyms are used throughout this report:

 

 

ADR--American Depositary Receipt
FRN--Floating Rate Note
GDR--Global Depositary Receipt

    

MTN--Medium Term Note
REMIC--Real Estate Mortgage Investment Conduit

 

Marshall

     

Cost of
Investments for
Federal Tax
Purposes

     

Net
Unrealized
Appreciation
(Depreciation)
for Federal Tax
Purposes

    

Gross
Unrealized
Appreciation for
Federal Tax
Purposes

     

Gross
Unrealized
Depreciation for
Federal Tax
Purposes

     

Total Net Assets

Equity Income Fund

  

$ 327,414,210

  

$ 15,286,874

  

$ 46,462,689

  

$ 31,175,815

  

$ 342,871,800

Large-Cap Growth & Income Fund

  

254,738,891

  

25,453,819

  

46,887,792

  

21,433,973

  

279,924,083

Mid-Cap Value Fund

  

189,759,029

  

10,091,275

  

26,058,229

  

15,966,954

  

200,209,375

Mid-Cap Growth Fund

  

239,741,545

  

(33,791,342)

  

9,162,180

  

42,953,522

  

205,605,583

Small-Cap Growth Fund

  

84,270,283

  

(5,731,925)

  

3,744,238

  

9,476,163

  

80,153,215

International Stock Fund

  

318,122,116

  

(12,995,842)

  

22,843,714

  

35,839,556

  

301,911,626

Government Income Fund

  

425,492,102

  

16,717,891

  

18,091,425

  

1,373,534

  

381,432,627

Intermediate Bond Fund

  

614,820,895

  

15,152,310

  

22,361,094

  

7,208,784

  

635,773,110

Short-Term Income Fund

  

113,780,125

  

156,575

  

2,901,183

  

2,744,608

  

115,143,771

Money Market Fund

  

2,877,931,877
*

--

  

--

  

--

  

2,881,806,262

* at amortized cost

August 31, 2002

Statements of Assets and Liabilities

 

    

Equity
Income
Fund

    

Large-Cap
Growth &
Income Fund

    

Mid-Cap
Value
Fund

    

Mid-Cap
Growth
Fund

  

Assets:

  

 

 

 

 

Investments in securities, at value

  

$ 334,269,607

  

$ 274,182,608

  

$ 194,711,274

  

$ 190,597,341

  

Investments in repurchase agreements

  

8,431,477

  

6,010,102

  

5,139,030

  

15,352,862

  

Short-term investments held as collateral for securities lending

  

10,101,512

  

42,415,906

  

32,645,623

  

63,891,070

  

Cash

  

16,449

  

21,290

  

1,705

  

12,120

  

Cash denominated in foreign currencies (identified cost, $906,952)

  

--

  

--

  

--

  

--

  

Income receivable

  

875,580

  

375,001

  

241,165

  

62,760

  

Receivable for investments sold

  

551,137

  

24

  

192,032

  

942,605

  

Receivable for capital stock sold

  

127,806

  

20,669

  

161,601

  

97,425

  

Total assets

  

354,373,568

  

323,025,600

  

233,092,430

  

270,956,183

  

Liabilities:

  

 

 

 

 

Payable for capital stock redeemed

  

216,879

  

413,059

  

5,250

  

42,759

  

Payable for investments purchased

  

624,634

  

--

  

--

  

1,184,122

  

Payable on collateral due to broker

  

10,101,512

  

42,415,906

  

32,645,623

  

63,891,070

  

Options written, at value (premium received $390,950)

  

205,445

  

--

  

--

  

--

  

Payable for income distribution

  

--

  

--

  

--

  

--

  

Net payable for foreign currency exchange contracts

  

--

  

--

  

--

  

--

  

Payable for dollar roll transactions

  

--

  

--

  

--

  

--

  

Accrued expenses

  

353,298

  

272,552

  

232,182

  

232,649

  

Total liabilities

  

11,501,768

  

43,101,517

  

32,883,055

  

65,350,600

  

Total Net Assets

  

$ 342,871,800

  

$ 279,924,083

  

$ 200,209,375

  

$ 205,605,583

  

Net Assets Consist of:

  

 

 

 

 

Paid-in-capital

  

330,512,179

  

297,111,440

  

192,118,289

  

312,732,693

  

Net unrealized appreciation (depreciation) on investments, options, futures contracts and foreign currency translation

  

17,905,895

  

27,377,880

  

10,482,444

  

(31,684,393

 )

Accumulated net realized gain (loss) on investments, options, futures contracts and foreign currency transactions

  

(5,949,413
)

(44,579,102
)

(2,554,591
)

(75,442,717

 )

Undistributed net investment income (accumulated net operating loss)

  

403,139

  

13,865

  

163,233

  

--

  

Total Net Assets

  

$ 342,871,800

  

$ 279,924,083

  

$ 200,209,375

  

$ 205,605,583

  

Net Asset Value, Offering Price and Redemption Proceeds Per Share

 

 

 

 

 

Investor Class of Shares:

  

 

 

 

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

$ 12.12

  

$ 10.59

  

$ 10.65

  

$ 9.31

  

Advisor Class of Shares:

  

 

 

 

 

Net Asset Value and Redemption proceeds Per Share

  

$ 12.12

  

$ 10.59

  

$ 10.65

  

$ 9.31

  

Offering Price Per Share

  

$ 12.86 *

  

$ 11.24 *

  

$ 11.30 *

  

$ 9.88 *

  

Institutional Class of Shares:

  

 

 

 

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

--

  

--

  

--

  

--

  

Net Assets:

  

 

 

 

 

Investor Class of Shares

  

$ 338,511,630

  

$ 274,959,630

  

$ 196,253,659

  

$ 203,009,938

  

Advisor Class of Shares

  

4,360,170

  

4,964,453

  

3,955,716

  

2,595,645

  

Institutional Class of Shares

  

--

  

--

  

--

  

--

  

Total Net Assets

  

$ 342,871,800

  

$ 279,924,083

  

$ 200,209,375

  

$ 205,605,583

  

Shares Outstanding:

  

 

 

 

 

Investor Class of Shares

  

27,926,805

  

25,959,651

  

18,430,494

  

21,796,816

  

Advisor Class of Shares

  

359,697

  

468,732

  

371,473

  

278,668

  

Institutional Class of Shares

  

--

  

--

  

--

  

--

  

Total Shares Outstanding

  

28,286,502

  

26,428,383

  

18,801,967

  

22,075,484

  

Investments, at identified cost

  

$ 324,476,280

  

$ 252,814,830

  

$ 189,367,874

  

$ 237,634,596

  

* Computation of offering price per share 100/94.25 of net asset value.
** Computation of offering price per share 100/95.25 of net asset value.
*** Computation of offering price per share 100/98.00 of net asset value.

 
Small-Cap
Growth
Fund
International
Stock
Fund
Government
Income
Fund
Intermediate
Bond
Fund
Short-Term
Income
Fund
Money
Market
Fund
 

$ 77,303,516

  

$ 303,578,274

  

$ 383,824,117

  

$ 588,874,328

  

$ 113,148,903

  

$ 2,667,931,877

  

1,234,842

  

1,548,000

  

58,385,876

  

41,098,877

  

787,797

  

210,000,000

  

22,296,042

  

57,174,918

  

69,977,628

  

104,474,716

  

--

  

--

  

12,053

  

936

  

12,837

  

14,245

  

1,772

  

--

  

--

  

906,972

  

--

  

--

  

--

  

--

  

14,578

  

711,874

  

1,500,528

  

7,758,450

  

1,104,746

  

9,521,424

  

2,278,114

  

13,500,111

  

5,110,513

  

15,298,726

  

546,116

  

--

  

421,418

  

1,096,209

  

724,345

  

160,686

  

--

  

14,176,295

  

103,560,563

  

378,517,294

  

519,535,844

  

757,680,028

  

115,589,334

  

2,901,629,596

  

 

 

 

 

 

 

554,535

  

11,171,498

  

147,809

  

374,556

  

135,531

  

15,918,438

  

420,243

  

7,865,230

  

5,097,622

  

15,303,023

  

--

  

--

  

22,296,042

  

57,174,918

  

69,977,628

  

104,474,716

  

--

  

--

  

--

  

--

  

612,295

  

1,330,594

  

262,092

  

2,801,647

  

--

  

10,307

  

--

  

--

  

--

  

--

  

--

  

--

  

61,976,148

  

--

  

--

  

--

  

136,528

  

383,715

  

291,715

  

424,029

  

47,940

  

1,103,249

  

23,407,348

  

76,605,668

  

138,103,217

  

121,906,918

  

445,563

  

19,823,334

  

$ 80,153,215

  

$ 301,911,626

  

$ 381,432,627

  

$ 635,773,110

  

$ 115,143,771

  

$ 2,881,806,262

  

 

 

 

 

 

 

109,857,402

  

417,966,476

  

373,456,503

  

657,078,646

  

122,086,161

  

2,881,959,091

  

(1,584,883
)

(10,948,859
)

16,723,795

  

16,581,053

  

299,186

  

--

  

(28,119,304
)

(104,313,600
)

(8,741,511
)

(37,954,945
)

(7,172,934
)

(152,829
)

--

  

(792,391)

  

(6,160)

  

68,356

  

(68,642)

  

--

  

$ 80,153,215

  

$ 301,911,626

  

$ 381,432,627

  

$ 635,773,110

  

$ 115,143,771

  

$ 2,881,806,262

  

 

 

 

 

 

 

 

 

 

 

 

 

$ 8.75

  

$ 9.31

  

$ 9.72

  

$ 9.44

  

$ 9.42

  

$ 1.00

  

 

 

 

 

 

 

$ 8.75

  

$ 9.30

  

$ 9.72

  

$ 9.44

  

$ 9.42

  

$ 1.00

  

$ 9.28

*

$ 9.87

 *

$ 10.20

 **

$ 9.91

 **

$ 9.61

 ***

$ 1.00

  

 

 

 

 

 

 

--

  

$ 9.37

  

--

  

--

  

--

  

$ 1.00

  

 

 

 

 

 

 

$ 77,713,249

  

$ 195,496,018

  

$ 377,594,021

  

$ 631,517,880

  

$ 114,319,561

  

$ 1,857,948,270

  

2,439,966

  

4,182,731

  

3,838,606

  

4,255,230

  

824,210

  

113,661,689

  

--

  

102,232,877

  

--

  

--

  

--

  

910,196,303

  

$ 80,153,215

  

$ 301,911,626

  

$ 381,432,627

  

$ 635,773,110

  

$ 115,143,771

  

$ 2,881,806,262

  

 

 

 

 

 

 

8,879,599

  

20,997,631

  

38,832,251

  

66,889,868

  

12,130,638

  

1,858,049,903

  

278,809

  

449,573

  

394,763

  

450,698

  

87,462

  

113,674,060

  

--

  

10,909,047

  

--

  

--

  

--

  

910,235,128

  

9,158,408

  

32,356,251

  

39,227,014

  

67,340,566

  

12,218,100

  

2,881,959,091

  

$ 80,123,241

  

$ 316,107,418

  

$ 425,486,198

  

$ 613,392,152

  

$ 113,637,514

  

$ 2,877,931,877

  

Year Ended August 31, 2002

Statements of Operations

 

     Equity
Income
Fund 		    Large-Cap
Growth &
Income
Fund 		    Mid-Cap
Value
Fund 		    Mid-Cap
Growth
Fund 		 
Investment Income:  

 

 

 

 
Interest income  

$ 188,214

  

$ 646,686

  

$ 412,451

  

$ 840,081

  
Dividend income  

9,298,609

 (1)

3,656,384

 (1)

2,494,388

 (1)

644,255

  
Total income  

9,486,823

  

4,303,070

  

2,906,839

  

1,484,336

  
Expenses:  

 

 

 

 
Investment adviser fee  

2,872,655

  

2,639,560

  

1,566,354

  

2,175,526

  
Shareholder services fees--  

 

 

 

 
Investor Class of Shares  

947,168

  

867,173

  

513,748

  

717,578

  
Advisor Class of Shares  

10,383

  

12,680

  

8,370

  

7,597

  
Administrative fees  

376,369

  

346,844

  

208,827

  

287,817

  
Portfolio accounting fees  

99,464

  

94,562

  

71,010

  

86,913

  
Transfer and dividend disbursing agent fees  

139,828

  

146,270

  

139,387

  

165,751

  
Custodian fees  

63,942

  

60,997

  

42,153

  

54,434

  
Registration fees  

28,242

  

31,718

  

33,972

  

27,179

  
Auditing fees  

14,711

  

14,710

  

14,710

  

14,710

  
Legal fees  

3,454

  

3,625

  

3,509

  

3,625

  
Printing and postage  

19,968

  

31,045

  

19,704

  

25,000

  
Directors' fees  

7,273

  

7,273

  

7,273

  

7,273

  
Insurance premiums  

2,404

  

2,276

  

1,504

  

2,052

  
Distribution services fees--  

 

 

 

 
Advisor Class of Shares  

10,383

  

12,680

  

8,370

  

7,597

  
Miscellaneous  

10,838

  

9,632

  

8,001

  

7,967

  
Total expenses  

4,607,082

  

4,281,045

  

2,646,892

  

3,591,019

  
Deduct--  

 

 

 

 
Waiver of investment adviser fee  

--

  

--

  

--

  

--

  
Waiver of shareholder services fees--  

 

 

 

 
Investor Class of Shares  

--

  

--

  

--

  

--

  
Advisor Class of Shares  

(10,383
)

(12,680
)

(8,370
)

(7,597
)
Total Waivers  

(10,383
)

(12,680
)

(8,370
)

(7,597
)
Net expenses  

4,596,699

  

4,268,365

  

2,638,522

  

3,583,422

  
Net investment income (net operating loss)  

4,890,124

  

34,705

  

268,317

  

(2,099,086)

  
 
Net Realized and Unrealized Gain (Loss) on Investments, Options, Futures Contracts and Foreign Currency:  

 

 

 

 
Net realized gain (loss) on investment transactions and options (identified cost basis)  

(1,549,327

 )

(18,836,919
)

(707,386)

  

(68,371,719
)
Net realized gain (loss) on futures contracts (identified cost basis)  

(3,125,998
)

(4,113,431
)

(1,778,463)

  

(4,375,822
)
Net realized gain (loss) on foreign currency (identified cost basis)  

--

  

--

  

180

  

--

  
Net change in unrealized appreciation (depreciation) on investments, options, futures contracts and foreign currency translation  

(51,947,249
)

(64,752,578
)

(11,109,533
)

(29,473,408
)
Net realized and unrealized gain (loss) on investments, options, futures contracts and foreign currency  

(56,622,574
)

(87,702,928
)

(13,595,202
)

(102,220,949
)
 
Change in net assets resulting from operations  

$(51,732,450
)

$(87,668,223
)

$(13,326,885
)

$(104,320,035
)

(1) Net of foreign taxes withheld of $27,884, $12,762, $8,705, $4,518, and $667,670, respectively.
(2) Net of dollar roll expense of $1,327,872.

 

Small-Cap
Growth
Fund

    

International
Stock
Fund

    

Government
Income
Fund

    

Intermediate
Bond
Fund

    

Short-Term
Income
Fund

    

Money
Market
Fund

  

$ 264,479

  

$ 268,959

  

$ 22,880,486

 (2)

$ 36,085,098

  

$ 6,379,730

  

$ 73,982,086

  

182,201

 (1)

5,767,426

 (1)

--

  

--

  

--

  

--

  

446,680

  

6,036,385

  

22,880,486

  

36,085,098

  

6,379,730

  

73,982,086

  

 

 

 

 

 

 

1,054,601

  

3,323,055

  

2,845,707

  

3,784,225

  

754,851

  

4,597,139

  

 

 

 

 

 

 

257,097

  

559,875

  

940,970

  

1,567,583

  

313,391

  

4,791,577

  

6,553

  

9,871

  

7,598

  

9,178

  

1,131

  

322,428

  

105,460

  

328,190

  

372,956

  

592,063

  

125,808

  

1,350,452

  

57,637

  

122,295

  

96,724

  

116,757

  

58,623

  

244,537

  

135,047

  

104,370

  

139,283

  

135,787

  

68,354

  

466,043

  

21,412

  

201,176

  

62,978

  

88,046

  

25,162

  

330,623

  

25,265

  

37,940

  

34,160

  

27,265

  

29,560

  

99,751

  

14,710

  

16,526

  

14,710

  

14,710

  

14,710

  

14,710

  

3,564

  

2,214

  

3,509

  

3,509

  

3,509

  

4,256

  

19,726

  

37,676

  

20,899

  

16,012

  

12,968

  

65,768

  

7,273

  

7,273

  

7,273

  

7,273

  

7,273

  

7,273

  

1,240

  

2,122

  

2,343

  

3,350

  

1,359

  

11,704

  

 

 

 

 

 

 

6,553

  

9,871

  

7,598

  

9,178

  

1,131

  

386,913

  

5,140

  

8,036

  

10,762

  

16,803

  

5,124

  

35,478

  

1,721,278

  

4,770,490

  

4,567,470

  

6,391,739

  

1,422,954

  

12,728,652

  

 

 

 

 

 

 

--

  

(70,000
)

(379,428
)

(378,422
)

(427,749
)

(1,098,213

 )

 

 

 

 

 

 

--

  

--

  

(865,693
)

(1,442,176
)

(288,320
)

--

  

(6,553
)

(9,871
)

(7,598
)

(9,178
)

(1,131
)

--

  

(6,553
)

(79,871
)

(1,252,719
)

(1,829,776
)

(717,200
)

(1,098,213

 )

1,714,725

  

4,690,619

  

3,314,751

  

4,561,963

  

705,754

  

11,630,439

  

(1,268,045
)

1,345,766

  

19,565,735

  

31,523,135

  

5,673,976

  

62,351,647

  

 

 

 

 

 

 

(25,427,634
)

(59,392,247
)

512,709

  

(8,520,585
)

47,525

  

(7,007
)

683,880

  

--

  

--

  

--

  

--

  

--

  

656

  

(882,998
)

--

  

--

  

--

  

--

  

(6,435,693
)

12,302,179

  

7,386,534

  

6,202,161

  

(1,316,104
)

--

  

(31,178,791
)

(47,973,066
)

7,899,243

  

(2,318,424
)

(1,268,579
)

(7,007
)

$ (32,446,836
)

$ (46,627,300
)

$ 27,464,978

  

$ 29,204,711

  

$ 4,405,397

  

$ 62,344,640

  

 

Statements of Changes in Net Assets

 

 

Equity
Income
Fund

Large-Cap
Growth &
Income Fund

    Year Ended
August 31,
2002 		    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  
Increase (Decrease) in Net Assets  

 

 

 

 
Operations--  

 

 

 

 
Net investment income (net operating loss)  

$ 4,890,124

  

$ 4,601,248

  

$ 34,705

  

$ 150,608

  
Net realized gain (loss) on investments and options transactions  

(1,549,327

 )

19,832,156

  

(18,836,919

 )

(17,367,829

 )
Net realized gain (loss) on futures contracts  

(3,125,998

 )

(3,441,318

 )

(4,113,431)

  

(1,892,744

 )
Net realized gain (loss) on foreign currency)  

--

  

--

  

--

  

--

  
Net change in unrealized appreciation (depreciation) of investments, options, futures contracts and foreign currency translation  

(51,947,249

 )

(11,491,423

 )

(64,752,578

 )

(108,663,462

 )
Change in net assets resulting from operations)  

(51,732,450

 )

9,500,663

  

(87,668,223

 )

(127,773,427

 )
Distributions to Shareholders--  

 

 

 

 
Distributions to shareholders from net investment income  

 

 

 

 
Investor Class of Shares  

(5,044,081

 )

(4,113,180

 )

(164,935

 )

(387,709

 )
Advisor Class of Shares  

(53,945

 )

(25,729

 )

(2,195

 )

(3,696

 )
Institutional Class of Shares  

--

  

--

  

--

  

--

  
Distributions to shareholders from net realized gain on investments  

 

 

 

 
Investor Class of Shares  

(14,838,709

 )

(2,914,298

 )

--

  

(21,253,461

 )
Advisor Class of Shares  

(144,767

 )

(17,420

 )

--

  

(199,698

 )
Institutional Class of Shares  

--

  

--

  

--

  

--

  
Change in net assets resulting from distributions to shareholders  

(20,081,502

 )

(7,070,627

 )

(167,130

 )

(21,844,564

 )
Capital Stock Transactions--  

 

 

 

 
Proceeds from sale of shares  

54,966,324

  

58,546,071

  

46,470,452

  

61,140,401

  
Net asset value of shares issued to shareholders in payment of distributions declared  

17,657,653

  

4,633,964

  

107,936

  

21,325,052

  
Cost of shares redeemed  

(76,217,323
)

(73,256,581
)

(70,501,282
)

(54,975,248

 )
Change in net assets resulting from capital stock transactions  

(3,593,346
)

(10,076,546
)

(23,922,894
)

27,490,205

  
Change in net assets  

(75,407,298

 )

(7,646,510

 )

(111,758,247

 )

(122,127,786

 )
Net Assets:  

 

 

 

 
Beginning of period  

418,279,098

  

425,925,608

  

391,682,330

  

513,810,116

  
End of period  

$ 342,871,800

  

$ 418,279,098

  

$ 279,924,083

  

$ 391,682,330

  
Undistributed net investment income (accumulated net operating loss) included in net assets at end of period  

$ 403,139

  

$ 611,041

  

$ 13,865

  

$ 146,290

  
 
 

 

Mid-Cap
Value Fund

 

Mid-Cap
Growth Fund

 

Small-Cap
Growth Fund

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

 

 

 

 

 

 

$ 268,317

$ 211,412

$ (2,099,086
)

$ (1,556,489
)

$ (1,268,045
)

$ (686,789

 )

(707,386
)

24,875,839

(68,371,719
)

7,534,050

(25,427,634
)

10,664,839

  

(1,778,463
)

(1,089,843
)

(4,375,822
)

(1,534,067
)

683,880

(4,176,868

 )

180

--

--

--

656

--

  

(11,109,533
)

3,878,691

(29,473,408
)

(188,928,073 )

(6,435,693
)

(46,191,525

 )

(13,326,885
)

27,876,099

(104,320,035
)

(184,484,579 )

(32,446,836
)

(40,390,343

 )

 

 

 

 

(146,095
)

(668,603
)

--

  

--

--

--

  

(2,090
)

(7,436
)

--

  

--

--

--

  

--

--

--

  

--

--

--

  

 

 

(22,874,085
)

(6,653,072
)

(876,922

 )

(97,066,185
)

(4,821,728
)

(13,280,301

 )

(351,861
)

(74,513
)

(8,848

 )

(663,495
)

(116,211
)

(201,636

 )

--

--

--

  

--

--

--

  

(23,374,131
)

(7,403,624 )

(885,770

 )

(97,729,680
)

(4,937,939
)

(13,481,937

 )

 

 

103,913,966

75,859,768

56,376,558

  

75,745,858

41,122,184

42,699,451

  

22,643,913

7,061,197

877,762

  

96,392,588

4,871,257

13,289,856

  

(64,654,487
)

(36,009,370
)

(83,212,079

 )

(97,686,196
)

(36,251,186
)

(55,428,320

 )

61,903,392

46,911,595

(25,957,759

 )

74,452,250

9,742,255

560,987

  

25,202,376

67,384,070

(131,163,564

 )

(207,762,009
)

(27,642,520
)

(53,311,293

 )

 

 

175,006,999

107,622,929

336,769,147

  

544,531,156

107,795,735

161,107,028

  

$ 200,209,375

$ 175,006,999

$ 205,605,583

  

$ 336,769,147

$ 80,153,215

$ 107,795,735

  

 

 

$ 163,233

$ 42,921

$ --

  

$ --

  

$ --

$ --

  

 

Statements of Changes in Net Assets

 
 

 

International
Stock Fund

Government
Income
Fund

 

   

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  
Increase (Decrease) in Net Assets  

 

 

 

 
Operations--  

 

 

 

 
Net investment income (net operating loss)  

$ 1,345,766

  

$ 1,453,548

  

$ 19,565,735

  

$ 22,684,729

  
Net realized gain (loss) on investment and options transactions  

(59,392,247

 )

(43,502,687

 )

512,709

  

4,584,409

  
Net realized gain (loss) on futures contracts  

--

  

--

  

--

  

--

  
Net realized gain (loss) on foreign currency  

(882,998

 )

(1,316,950

 )

--

  

--

  
Net change in unrealized appreciation (depreciation) of investments, options, futures contracts and foreign currency translation  

12,302,179

  

(88,132,643

 )

7,386,534

  

8,754,436

  
Change in net assets resulting from operations  

(46,627,300

 )

(131,498,732

 )

27,464,978

  

36,023,574

  
Distributions to Shareholders--  

 

 

 

 
Distributions to shareholders from net investment income  

 

 

 

 
Investor Class of Shares  

--

  

--

  

(19,870,618

 )

(22,613,781
)
Advisor Class of Shares  

--

  

--

  

(152,957

 )

(110,393
)
Institutional Class of Shares  

--

  

--

  

--

  

--

  
Distributions to shareholders from net realized gain on investments  

 

 

 

 
Investor Class of Shares  

--

  

(33,371,017
)

--

  

--

  
Advisor Class of Shares  

--

  

(390,149

 )

--

  

--

  
Institutional Class of Shares  

--

  

(15,060,189
)

--

  

--

  
Change in net assets resulting from distributions to shareholders  

--

  

(48,821,355

 )

(20,023,575

 )

(22,724,174
)
Capital Stock Transactions--  

 

 

 

 
Proceeds from sale of shares  

218,685,271

  

247,575,054

  

95,178,601

  

65,432,184

  
Net asset value of shares issued to shareholders in payment of distributions declared  

--

  

47,791,410

  

12,326,453

  

14,045,043

  
Cost of shares redeemed  

(229,717,274

 )

(243,821,846

 )

(116,273,076
)

(68,738,231
)
Change in net assets resulting from capital stock transactions  

(11,032,003

 )

51,544,618

  

(8,768,022

 )

10,738,996

  
Change in net assets  

(57,659,303

 )

(128,775,469

 )

(1,326,619

 )

24,038,396

  
Net Assets:  

 

 

 

 
Beginning of period  

359,570,929

  

488,346,398

  

382,759,246

  

358,720,850

  
End of period  

$ 301,911,626

  

$ 359,570,929

  

$ 381,432,627

  

$ 382,759,246

  
   

 

 

 

 
Undistributed net investment income (accumulated net operating loss) included in net assets at end of period  

$ (792,391

 )

$ (3,039,914

 )

$ (6,160

 )

$ 265

  
 

Intermediate
Bond
Fund

Short-Term
Income
Fund

Money
Market
Fund

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

 

 

 

 

 

$ 31,523,135

$ 37,399,343

  

$ 5,673,976

  

$ 7,632,931

  

$ 62,351,647

  

$ 128,213,532

(8,520,585
)

1,466,569

  

47,525

  

(937,731
)

(7,007
)

(145,822
)

--

  

--

  

--

  

--

  

--

  

--

--

  

--

  

--

  

--

  

--

  

--

6,202,161

  

22,426,317

  

(1,316,104
)

5,233,523

  

--

  

--

29,204,711

  

61,292,229

  

4,405,397

  

11,928,723

  

62,344,640

  

128,067,710

  

 

 

 

 

 

 

 

 

 

 

 

(33,505,994
)

(37,280,833
)

(6,239,624
)

(7,653,555
)

(37,389,606
)

(92,313,480

 )

(187,339
)

(143,096
)

(21,027
)

(3,006
)

(2,174,238
)

(6,001,217

 )

--

  

--

  

--

  

--

  

(22,787,803
)

(29,898,835

 )

 

 

 

 

 

 

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

(33,693,333
)

(37,423,929
)

(6,260,651
)

(7,656,561
)

(62,351,647
)

(128,213,532

 )

 

 

 

 

 

 

161,234,207

  

161,319,013

  

52,784,668

  

42,309,425

  

10,014,120,035

  

9,007,684,945

  

16,654,681

  

17,371,080

  

3,343,293

  

4,317,480

  

16,309,836

  

30,419,965

  

(181,719,809
)

(173,414,101
)

(65,233,789
)

(47,297,424
)

(9,888,216,033
)

(8,357,725,162

 )

(3,830,921
)

5,275,992

  

(9,105,828
)

(670,519
)

142,213,838

  

680,379,748

  

(8,319,543
)

29,144,292

  

(10,961,082
)

3,601,643

  

142,206,831

  

680,233,926

  

 

 

 

 

 

 

644,092,653

  

614,948,361

  

126,104,853

  

122,503,210

  

2,739,599,431

  

2,059,365,505

  

$ 635,773,110

  

$ 644,092,653

  

$ 115,143,771

  

$ 126,104,853

  

$ 2,881,806,262

  

$ 2,739,599,431

  

 

 

 

 

 

 

$ 68,356

  

$ 4,469

  

$ (68,642
)

$ (18
)

$ --

  

$ --

  

For the Year Ended August 31, 2002

Statement of Cash Flows

 
   

Government
Income
Fund

  
Increase (Decrease) in Cash  

 

  
Cash Flows From Operating Activities:  

 
Net increase in net assets from operations  

$ 27,464,978

  
Adjustments to reconcile change in net assets resulting from operations to net cash used in operating activities:  

 
Purchases of investment securities  

(1,039,344,912

 )
Paydown on investment securities  

99,660,270

  
Realized loss on paydowns  

516,736

  
Proceeds from sale of investment securities  

977,485,508

  
Net purchase of short-term investment securities  

(20,189,805

 )
Decrease in income receivable  

213,556

  
Decrease in cash held as collateral for securities lending  

71,700,395

  
Decrease in accrued expenses  

(17,126

 )
Increase in receivable for investments sold  

(5,110,513

 )
Increase in payable for investments purchased  

5,097,622

  
Decrease in payable on collateral due to broker  

(71,700,395

 )
Net realized gain on investments  

(512,709

 )
Net amorized/accretion of premium/discount  

(54,691

 )
Net change in unrealized appreciation on investments  

(7,386,534

 )
NET CASH PROVIDED BY OPERATING ACTIVITIES  

37,822,380

  
Cash flow from Financing Activities:  

 
Cash received from dollar roll transactions, net  

(8,331,180

 )
Proceeds from sale of shares  

94,637,480

  
Cash distributions paid  

(7,815,446

 )
Payment for shares redeemed  

(116,300,397

 )
NET CASH USED IN FINANCING ACTIVITIES  

(37,809,543

 )
NET INCREASE IN CASH  

12,837

  
Cash:  

 
Beginning of the year  

--

  
End of the year  

$ 12,837

  

Financial Highlights -- Advisor Class of Shares (for a share outstanding throughout the period)

 

Period
Ended
August 31,

Net asset
value,
beginning
of period

Net
investment
income
(net
operating
loss)

Net realized and
unrealized
gain (loss) on
investments,
options, futures
contracts and
foreign currency

Total from
investment
operations

Dividends to
shareholders
from net
investment
income

Distributions to
shareholders from
net realized gain
on investments,
options, futures
contracts and
foreign currency

Total
distributions

Net asset
value, end
of period

Total
return(1)

 

Ratios to Average Net Assets

Net assets,
end of
period
(000 omitted)

Portfolio
turnover
rate

Expenses

Net
investment
income
(net operating
loss)

Expense
waiver(2)
Equity Income Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 15.88

  

0.16

  

0.81

  

0.97

  

(0.14
)

--

  

(0.14

 )

$ 16.71

6.13

 %

1.17
%(4)

1.68

 %(4)

0.25

 %(4)

$ 755

  

72%
2000  

$ 16.71

  

0.23

  

(0.73

 )

(0.50

 )

(0.23

 )

(1.36

 )

(1.59

 )

$ 14.62

(2.80

 )%

1.16

 %

1.55

 %

0.25

 %

$ 2,081

  

98%
2001  

$ 14.62

  

0.16

  

0.16

  

0.32

  

(0.14

 )

(0.10

 )

(0.24

 )

$ 14.70

2.20

 %

1.19

 %

1.09

 %

0.25

 %

$ 3,628

78%
2002  

$ 14.70

  

0.14

  

(1.99

 )

(1.85

 )

(0.18

 )

(0.55

 )

(0.73

 )

$ 12.12

(13.16

 )%

1.20

 %

1.30

 %

0.25

 %

$ 4,360

  

50%
Large-Cap Growth & Income Fund

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 16.34

  

0.02

  

1.14

  

1.16

  

(0.02

 )

--

  

(0.02)

  

$ 17.48

7.08

 %

1.20
%(4)

0.15

 %(4)

0.25

 %(4)

$ 912

  

32
2000  

$ 17.48

  

0.03

  

2.72

  

2.75

  

(0.02

 )

(0.99

 )

(1.01

 )

$ 19.22

16.35

 %

1.18

 %

0.14

 %

0.25

 %

$ 3,615

  

71%
2001  

$ 19.22

  

0.01

  

(4.66

 )

(4.65

 )

(0.01

 )

(0.81

 )

(0.82

 )

$ 13.75

(24.79

 )%

1.19

 %

0.05

 %

0.25

 %

$ 4,771

  

63%
2002  

$ 13.75

  

0.01

  

(3.16

 )

(3.15

 )

(0.01

 )

--

  

(0.01

 )

$ 10.59

(22.94

 )%

1.21

 %

0.01

 %

0.25

 %

$ 4,964

  

62%
Mid-Cap Value Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 10.77

  

0.05

  

0.62

  

0.67

  

(0.04

 )

--

  

(0.04

 )

$ 11.40

6.22

 %

1.26
%(4)

0.71

 %(4)

0.25

 %(4)

$ 356

  

90%
2000  

$ 11.40

  

0.09

  

0.79

  

0.88

  

(0.05

 )

(1.38

 )

(1.43

 )

$ 10.85

9.29

 %

1.33

 %

1.04

 %

0.25

 %

$ 1,054

  

94%
2001  

$ 10.85

  

0.02

  

2.62

  

2.64

  

(0.07

 )

(0.70

 )

(0.77

 )

$ 12.72

25.80

 %

1.30

 %

0.17

 %

0.25

 %

$ 2,288

  

104%
2002  

$ 12.72

  

0.02

  

(0.40

 )

(0.38

 )

(0.01

 )

(1.68

 )

(1.69

 )

$ 10.65

(4.25

 )%

1.26

 %

0.13

 %

0.25

 %

$ 3,956

  

44%
Mid-Cap Growth Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 15.13

  

(0.02

 )

2.17

  

2.15

  

--

  

--

  

--

  

$ 17.28

14.21

 %

1.21
%(4)

(0.74

 )%(4)

0.25

 %(4)

$ 278

  

173%
2000  

$ 17.28

  

(0.16

 )(5)

12.00

  

11.84

  

--

  

(1.69

 )

(1.69

 )

$ 27.43

71.91

 %

1.18

 %

(0.63

 )%

0.25

 %

$ 2,726

  

108%
2001  

$ 27.43

  

(0.06

 )(5)

(8.67

 )

(8.73

 )

--

  

(4.97

 )

(4.97

 )

$ 13.73

(34.17

 )%

1.19

 %

(0.39

 )%

0.25

 %

$ 3,051

  

118%
2002  

$ 13.73

  

(0.09

 )(5)

(4.29

 )

(4.38

 )

--

  

(0.04

 )

(0.04

 )

$ 9.31

(32.01

 )%

1.24

 %

(0.73

 )%

0.25

 %

$ 2,596

  

167%
Small-Cap Growth Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 12.73

  

(0.02

 )

(0.33

 )

(0.35

 )

--

  

--

  

--

  

$ 12.38

(2.75

 )%

1.59

 %(4)

(1.03
)%(4)

0.25

 %(4)

$ 394

  

219%
2000  

$ 12.38

  

(0.18

 )(5)

7.03

  

6.85

  

--

  

(0.41

 )

(0.41

 )

$ 18.82

56.14

 %

1.59

 %

(1.02

 )%

0.25

 %

$ 1,771

  

105%
2001  

$ 18.82

  

(0.08

 )(5)

(4.52

 )

(4.60

 )

--

  

(1.63

 )

(1.63

 );

$ 12.59

(24.23

 )%

1.58

 %

(0.70

 )%

0.25

 %

$ 2,399

  

287%
2002  

$ 12.59

  

(0.14

 )(5)

(3.12

 )

(3.26

 )

--

  

(0.58

 )

(0.58

 )

$ 8.75

(27.23

 )%

1.63

 %

(1.21

 )%

0.25

 %

$ 2,440

  

292%
International Stock Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 12.69

  

0.00

 6)

1.14

  

1.14

  

--

  

--

  

--

  

$ 13.83

8.98

 %

1.50

 %(4)

0.13
%(4)

0.27

 %(4)

$ 429

  

182%
2000  

$ 13.83

  

(0.05

 )(5)

4.08

  

4.03

  

(0.17

 )

(1.36

 )

(1.53

 )

$ 16.33

28.11

 %

1.51

 %

(0.32

 )%

0.27

 %

$ 2,184

  

225%
2001  

$ 16.33

  

0.04

 (5)

(4.03

 )

(3.99

 )

--

  

(1.61

 )

(1.61

 )

$ 10.73

(26.36

 )%

1.46

 %

0.34

 %

0.27

 %

$ 3,555

  

156%
2002  

$ 10.73

  

0.03

 (5)

(1.46

 )

(1.43

 )

--

  

--

  

--

  

$ 9.30

(13.33

 )%

1.49

 %

0.30

 %

0.27

 %

$ 4,183

  

83%
Government Income Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 9.61

  

0.34

  

(0.39

 )

(0.05

 )

(0.34

 )

--

  

(0.34

 )

$ 9.22

(0.56

 )%

1.09

 %(4)

5.55
%(4)

0.36

 %(4)

$ 754

  

232%
2000  

$ 9.22

  

0.55

  

(0.02

 )

0.53

  

(0.55

 )

--

  

(0.55

 )

$ 9.20

5.96

 %

1.08

 %

6.06

 %

0.35

 %

$ 1,491

  

192%
2001  

$ 9.20

  

0.55

  

0.33

  

0.88

  

(0.55

 )

--

  

(0.55

 )

$ 9.53

9.77

 %

1.10

 %

5.81

 %

0.35

 %

$ 2,451

  

122%
2002  

$ 9.53

  

0.47

 (5)(8)

0.20

 (8)

0.67

  

(0.48

 )

--

  

(0.48

 )

$ 9.72

7.25

 %

1.10

 %

4.90
%(8)

0.35

 %

$ 3,839

  

76%
Intermediate Bond Fund  

 

 

 

 

 

 

 

 

 

 

1999(3)  

$ 9.53

  

0.35

  

(0.36

 )

(0.01

 )

(0.35

 )

--

  

(0.35

 )

$ 9.17

(0.09

 )%

0.94

 %(4)

5.79
%(4)

0.31

 %(4)

$ 953

  

181%
2000  

$ 9.17

  

0.55

  

(0.01

 )

0.54

  

(0.55

 )

--

  

(0.55

 )

$ 9.16

6.10

 %

0.93

 %

6.12

 %

0.31

 %

$ 1,969

  

243%
2001  

$ 9.16

  

0.53

  

0.35

  

0.88

  

(0.53

 )

--

  

(0.53

 )

$ 9.51

9.89

 %

0.95

 %

5.67

 %

0.31

 %

$ 3,230

  

273%
2002  

$ 9.51

  

0.45

 (5)(8)

(0.04

 )(8)

0.41

  

(0.48

 )

--

  

(0.48

 )

$ 9.44

4.46

 %

0.95

 %

4.77
%(8)

0.31

 %

$ 4,255

  

187%
Short-Term Income Fund  

 

 

 

 

 

 

 

 

 

 

2001(7)  

$ 9.26

  

0.46

  

0.28

  

0.74

  

(0.46

 )

--

  

(0.46

 )

$ 9.54

8.15

 %

0.76

 %(4)

5.68
%(4)

0.59

 %(4)

$ 97

  

79%
2002  

$ 9.54

  

0.39

 (5)(8)

(0.06

 )(8)

0.33

  

(0.45

 )

--

  

(0.45

 )

$ 9.42

3.53

 %

0.79

 %

4.21
%(8)

0.59

 %

$ 824

  

54%
Money Market Fund  

 

 

 

 

 

 

 

 

 

 

1998  

$ 1.00

  

0.05

  

--

  

0.05

  

(0.05

 )

--

  

(0.05

 )

$ 1.00

5.19

 %

0.71

 %

5.12

 %

0.25

 %

$ 105,125

  

--
1999  

$ 1.00

  

0.05

  

--

  

0.05

  

(0.05

 )

--

  

(0.05

 )

$ 1.00

4.67

 %

0.71

 %

4.57

 %

0.25

 %

$ 118,352

  

--
2000  

$ 1.00

  

0.05

  

--

  

0.05

  

(0.05

 )

--

  

(0.05

 )

$ 1.00

5.56

 %

0.74

 %

5.44

 %

0.16

 %

$ 140,787

  

--
2001  

$ 1.00

  

0.05

  

--

  

0.05

  

(0.05

 )

--

  

(0.05

 )

$ 1.00

5.00

 %

0.76

 %

4.90

 %

0.05

 %

$ 127,707

  

--
2002  

$ 1.00

  

0.02

  

--

  

0.02

  

(0.02

 )

--

  

(0.02

 )

$ 1.00

1.69

 %

0.75

 %

1.69

 %

0.04

 %

$ 113,662

  

--

(1) Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
(2) This voluntary expense decrease is reflected in both the expense and net investment income (net operating loss) ratios.
(3) Reflects operations for the period from December 31, 1998 (start of performance) to August 31, 1999.
(4) Computed on an annualized basis.
(5) Per share information is based on average shares outstanding.
(6) Amount represents less than $0.01 per share.
(7) Reflects operations for the period from October 31, 2000 (start of performance) to August 31, 2001.
(8) Effective September 1, 2001, the Government Income Fund, Intermediate Bond Fund and Short-Term Income Fund adopted the provisions of the American Institute of Certified Public Accountants ("AICPA") Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended August 31, 2002 was as follows:

 

    

Net Investment
Income per Share

    

Net Realized/Unrealized
Gain/Loss per Share

    

Ratio of Net Investment Income
to Average Net Assets
Increase (Decrease)  

 

 

Government Income Fund  

$ (0.01)   

  

$ 0.01   

  

      (0.12)%  
Intermediate Bond Fund  

(0.03)

  

0.03

  

(0.32)
Short-Term Income Fund  

(0.04)

  

0.04

  

(0.40)

Per share, ratios and supplemental data for periods prior to September 1, 2001 have not been restated to reflect this change in presentation.

 

 

Notes to Financial Statements

1. Organization

Marshall Funds, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, management investment company. The Corporation consists of eleven diversified portfolios (individually referred to as the "Fund", or collectively as the "Funds"), ten of which are presented herein:

Portfolio Name

    

Investment Objective

Marshall Equity Income Fund ("Equity Income Fund")

  

To provide capital appreciation and above-average dividend income.

Marshall Large-Cap Growth & Income Fund
("Large-Cap Growth & Income Fund")

  

To provide capital appreciation and income.

Marshall Mid-Cap Value Fund ("Mid-Cap Value Fund")

  

To provide capital appreciation.

Marshall Mid-Cap Growth Fund ("Mid-Cap Growth Fund")

  

To provide capital appreciation.

Marshall Small-Cap Growth Fund ("Small-Cap Growth Fund")

  

To provide capital appreciation.

Marshall International Stock Fund ("International Stock Fund")

  

To provide capital appreciation.

Marshall Government Income Fund ("Government Income Fund")

  

To provide current income.

Marshall Intermediate Bond Fund ("Intermediate Bond Fund")

  

To maximize total return consistent with current income.

Marshall Short-Term Income Fund ("Short-Term Income Fund")

  

To maximize total return consistent with current income.

Marshall Money Market Fund ("Money Market Fund")

  

To provide current income consistent with stability of principal.

The Funds are offered in two classes of shares: Investor Class of Shares and Advisor Class of Shares. International Stock Fund and Money Market Fund offer three classes of shares: Investor Class of Shares, Advisor Class of Shares and Institutional Class of Shares. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Financial Highlights of Investor Class of Shares and Institutional Class of Shares of the Funds are presented in separate annual reports.

2. Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States.

Investment Valuations--Listed equity securities are valued at the last sale price reported on a national securities exchange. U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Money Market Fund's use of the amortized cost method to value portfolio securities is in accordance with Rule 2a-7 under the Act. For fluctuating net asset value Funds within the Corporation, short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities purchased with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors (the "Directors").

Statement of Cash Flows--Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount reported as cash in the Statement of Assets and Liabilities and represents cash on hand in its custodian bank account and does not include any short-term investments at August 31, 2002.

Repurchase Agreements--It is the policy of the Funds to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Funds to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement, including accrued interest.

The Funds will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Funds' adviser (or sub-adviser with respect to International Stock Fund) to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Directors. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Funds could receive less than the repurchase price on the sale of collateral securities.

Investment Income, Expenses and Distributions--Interest income and expenses are accrued daily. All discounts/premiums are accreted/amortized for financial reporting purposes as required. Gains and losses are realized on pre-payment of mortgage-backed securities (pay-down gains and losses) are classified as part of interest income. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair market value. The Funds offer multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Funds based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Effective September 1, 2001, the Corporation has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amorting premium on long-term debt securities and classifying paydown gains and losses as part of interest income. Prior to September 1, 2001, the Funds did not accrete discount and amortize premium on long-term debt securities. The cumulative effect of this accounting change had no impact on the total net assets of the Funds, but resulted in adjustments to the financial statements as follows:

 


As of September 1, 2001

For the Year Ended
August 31, 2002

 

   

Cost of
Investments

     

Undistributed
Net Investment
Income

    

Accumulated
Net
Realized
Gain (Loss)

   

Net
Investment
Income

   

Unrealized
Appreciation
(Depreciation)

     

Net Realized
Gain (Loss)

Increase (Decrease)

 

   

 

 

 

   

Government Income Fund

  

$ 41,338

    

$ (427,302)

  

$ 468,640

  

$ (451,297)

  

$ (19,790

 )  

$ 471,087

Intermediate Bond Fund

  

(258,062

 )  

(1,788,825)

  

1,530,763

  

(2,005,509)

  

978,504

    

1,027,005

Short-Term Income Fund

  

19,907

    

(333,171)

  

313,264

  

(504,599)

  

122,704

    

381,895

The Statements of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

Reclassification--Income and capital gain distributions are determined in accordance with income tax regulations which differ from generally accepted accounting principles ("GAAP"). These differences are primarily attributable to differing book/tax treatments of net operating loss and foreign currency transactions. Amounts as of August 31, 2002 have been reclassed to reflect the following:

 

 

 

Increase (Decrease)

Fund Name

  

Paid-in Capital

     

Accumulated Net
Realized Gain (Loss)

  

  

Undistributed Net
Investment
Income

Mid-Cap Value Fund

$ --

    

$ (180

 )

$ 180

Mid-Cap Growth Fund

(2,100,246

 )  

1,160

  

2,099,086

Small-Cap Growth Fund

(1,267,862

 )  

(183

 )

1,268,045

International Stock Fund

(1,784,754

 )  

882,997

 )

901,757

Government income Fund

--

    

(878,717

 )

878,717

Intermediate Bond Fund

--

    

(4,022,910

 )

4,022,910

Short-Term Income Fund

(302,405

 )  

(548,817

 )

851,222

Net investment income, net realized gains (losses) and net assets were not affected by this reclassification.

As of August 31, 2002, the tax composition of distributions was as follows:

Fund Name

   

Ordinary
Income

   

Long-Term
Capital Gains

Equity Income Fund

  

$ 18,467,629

  

$ 1,613,873

Large-Cap Growth & Income Fund

  

167,130

  

--

Mid-Cap Value Fund

  

10,593,982

  

12,780,149

Mid-Cap Growth Fund

  

--

  

885,770

Small-Cap Growth Fund

  

--

  

4,937,939

Government Income Fund

  

20,023,575

  

--

Intermediate Bond Fund

  

33,693,333

  

--

Short-Term Income Fund

  

6,260,651

  

--

Money Market Fund

  

62,351,647

  

--

As of August 31, 2002, the components of distributable earnings on a tax basis were as follows:

Fund Name

   

Undistributed
Ordinary Income

   

Unrealized
Appreciation
(Depreciation)

  

Equity Income Fund

  

$ 403,137

  

$ 15,271,692

  

Large-Cap Growth & Income Fund

  

13,865

  

25,453,819

  

Mid-Cap Value Fund

  

163,233

  

10,091,289

  

Mid-Cap Growth Fund

  

--

  

(33,791,342

 )

Small-Cap Growth Fund

  

--

  

(5,731,925

 )

International Stock Fund

  

--

  

(12,963,557

 )

Government Income Fund

  

606,135

  

16,717,891

  

Intermediate Bond Fund

  

1,398,949

  

15,152,310

  

Short-Term Income Fund

  

257,653

  

156,575

  

Money Market Fund

  

2,801,647

  

--

  

At year-end, there were no significant differences between GAAP basis and tax basis of components of net assets, other than differences in the net unrealized appreciation (depreciation) in value of investments attributable to the tax treatment of premium and discount and wash sales loss deferrals.

Federal Taxes--It is the Funds' policy to comply with the provisions of Subchapter M of the Internal Revenue Code, as amended (the "Code") applicable to regulated investment companies and to distribute to shareholders each year substantially all of their income. Accordingly, no provisions for federal tax are necessary.

Withholding taxes on foreign dividends have been provided for in accordance with the applicable country's tax rules and rates.

At August 31, 2002, the following Funds had capital loss carryforwards for federal tax purposes, which will reduce each Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve each Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforwards will expire as listed below:

 

Capital Loss Carryforward to Expire in

Fund

  

2003

  

2004

  

2005

  

2006

  

2007

  

2008

  

2009

  

2010

  

Total
Equity Income Fund   

$ --

   

$ --

   

$ --

   

$ --

   

$ --

   

$ --

   

$ --

   

$ 3,315,209

   

$ 3,315,209
Large Cap Growth & Income Fund  

--

  

--

  

--

  

--

  

--

  

--

  

4,529,087

  

19,615,825

  

24,144,912
Mid-Cap Value Fund  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

405,788

  

405,788
Mid-Cap Growth Fund  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

6,610,904

  

6,610,904
Small-Cap Growth Fund  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

4,808,611

  

4,808,611
International Stock Fund  

--

  

--

  

--

  

--

  

--

  

--

  

2,042,934

  

63,689,740

  

65,732,674
Government Income Fund  

--

  

--

  

--

  

--

  

--

  

8,554,228

  

--

  

--

  

8,554,228
Intermediate Bond Fund  

10,386,677

  

6,100,494

  

--

  

--

  

--

  

2,990,074

  

--

  

6,283,428

  

25,760,673
Short-Term Income Fund  

1,898,650

  

556,158

  

545,815

  

618,371

  

952,637

  

222,218

  

928,524

  

944,182

  

6,666,555
Money Market Fund  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

145,822

  

145,822

Additionally, the following net capital losses or currency losses attributable to security transactions incurred after October 31, 2001 are treated as arising on September 1, 2002, the first day of each Fund's next taxable year:

Fund

  

Capital Loss

   

Currency
Loss

Large Cap Growth & Income Fund

   

$ 18,510,126

  

$ --

Mid-Cap Value Fund

  

1,757,647

  

--

Mid-Cap Growth Fund

  

66,724,864

  

--

Small-Cap Growth Fund

  

19,163,651

  

--

International Stock Fund

  

36,566,228

  

792,391

Government Income Fund

  

181,379

  

--

Intermediate Bond Fund

  

10,765,529

  

--

Short-Term Income Fund

  

363,769

  

--

Money Market Fund

  

7,007

  

--

When-Issued and Delayed Delivery Transactions--The Funds may engage in when-issued or delayed delivery transactions. The Funds record when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked-to-market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Futures Contracts--Equity Income Fund, Large-Cap Growth & Income Fund, Mid-Cap Value Fund, Mid-Cap Growth Fund and Small-Cap Growth Fund purchase stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities.

At August 31, 2002, the Equity Income Fund had outstanding futures contracts as set forth below:

Fund

   

Expiration Date

   

Contracts to Receive

   

Position

    

Unrealized
Depreciation

Equity Income Fund

  

September 2002

  

21 S&P 500

  

Long

  

$ (504,414)

Written Options Contracts--Equity Income Fund and Small-Cap Growth Fund may write option contracts. A written option obligates the Fund to deliver a call, or to receive a put, for the contract amount upon exercise by the holder of the option. The value of the option contract is recorded as a liability and unrealized gain or loss is measured by the difference between the current value and the premium received. For the year ended August 31, 2002, the Equity Income Fund and the Small-Cap Growth Fund had $(1,475,377) and $47,198, respectively, in realized gain (loss) on written options.

The following is a summary of the Small-Cap Growth Fund's written option activity:

Contracts

   

Number of
Contracts

     

Premium

  

Outstanding @ 8/31/01

  

0

    

$ 0

  

Options written

  

800

    

74,398

  

Options expired

  

0

    

0

  

Options closed

  

(800

 )  

(74,398

 )

Options assigned

  

0

    

0

  

Outstanding @ 8/31/02

  

0

    

$ 0

  

The following is a summary of the Equity Income Fund's written option activity:

Contracts

    

Number of
Contracts

      

Premium

  

Outstanding @ 8/31/01

  

10,490

    

$ 542,471

  

Options written

  

46,144

    

5,320,496

  

Options expired

  

(32,226

 )  

(2,822,848

 )

Options closed

  

(20,358

 )  

(2,644,137

 )

Options assigned

  

(21

 )  

(5,032

 )

Outstanding @ 8/31/02

  

3,989

    

$ 390,950

  

At August 31, 2002, the Equity Income Fund had the following outstanding options:

Contract

   

Type

   

Expiration Date

   

Exercise
Price

   

Number of
Contracts

    

Market
Value

   

Unrealized
Appreciation
(Depreciation)

  

Clorox Co.

  

Call

  

October 2002

  

$ 45.00

  

375

  

$ 39,375

  

$ 4,749

  

Campbell Soup Co.

  

Call

  

September 2002

  

25.00

  

310

  

5,425

  

14,104

  

Procter & Gamble Co.

  

Call

  

September 2002

  

95.00

  

100

  

1,500

  

8,700

  

Ryder System, Inc.

  

Call

  

November 2002

  

30.00

  

284

  

12,070

  

11,501

  

3M Co.

  

Call

  

September 2002

  

135.00

  

100

  

4,000

  

16,449

  

Albertson's, Inc.

  

Put

  

September 2002

  

27.50

  

400

  

82,000

  

(41,201

 )

Alcoa, Inc.

  

Put

  

September 2002

  

22.50

  

320

  

7,200

  

16,159

  

Bank of America Corp.

  

Put

  

September 2002

  

47.50

  

250

  

1,250

  

36,749

  

Bristol-Myers Squibb Co.

  

Put

  

September 2002

  

17.50

  

600

  

9,000

  

49,198

  

Goodrich Corp.

  

Put

  

September 2002

  

20.00

  

650

  

40,625

  

40,298

  

Hewlett Packard Co.

  

Put

  

September 2002

  

10.00

  

600

  

3,000

  

28,799

  

Net Unrealized Appreciation on Written Options Contracts

  

3,989

  

 

$ 185,505

  

Foreign Exchange Contracts--International Stock Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The International Stock Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross hedge against either specific transactions or portfolio positions. The objective of the International Stock Fund's foreign currency hedging transactions is to reduce the risk that the U.S. dollar value of the International Stock Fund's foreign currency denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are "marked-to-market" daily at the applicable translation rates resulting in unrealized gains or losses. Realized gains or losses are recorded at the time the foreign currency exchange contract is offset by entering into a closing transaction or by the delivery or receipt of the currency. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. As of August 31, 2002, International Stock Fund had outstanding foreign currency exchange contracts as set forth below:

Settlement Date

    

Foreign Currency
Units to
Deliver/Receive

   

In Exchange

    

Contract at
Value

    

Unrealized
Appreciation
(Depreciation)

  

Contracts sold:

  

 

  

 

 

 

09/03/2002

  

111,328 Euro Dollar

  

$ 109,380

  

$ 109,185

  

$ 195

  

09/03/2002

  

1,245,396 British Pound Sterling

  

1,917,909

  

1,927,624

  

(9,715

 )

09/03/2002

  

765,821 Singapore Dollar

  

436,863

  

437,650

  

(787

 )

Net Unrealized Depreciation on Foreign Currency Exchange Contacts

  

 

$ (10,307

 )

Foreign Currency Translation--The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FCs") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds' books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Dollar Roll Transactions--The Funds, except for Money Market Fund, may enter into dollar roll transactions, with respect to mortgage securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, in which the Funds loan mortgage securities to financial institutions and simultaneously agree to accept substantially similar (same type, coupon and maturity) securities at a later date at an agreed upon price. Dollar roll transactions are short-term financing arrangements which will not exceed twelve months. The Funds will use the proceeds generated from the transactions to invest in short-term investments, which may enhance the Funds' current yield and total return.

Information regarding dollar roll transactions for the Government Income Fund for the year ended August 31, 2002 was as follows:

Maximum amount outstanding during the period

    

$70,595,852

Average amount outstanding during the period1

  

$60,415,948

Average monthly shares outstanding during the period

  

39,691,118

Average debt per share outstanding during the period

  

1.52

(1) The average amount outstanding during the period was calculated by adding the borrowings at the end of the day and dividing the sum by the number of days in year ended August 31, 2002.

Securities Lending--The Funds participate in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. The Funds receive cash as collateral in return for the securities and record a corresponding payable for collateral due to the respective broker. The amount of cash collateral received is maintained at a minimum level of 100% of the prior day's market value on securities loaned. Collateral is reinvested in short-term securities including overnight repurchase agreements, commercial paper, master notes, floating rate corporate notes (with at least quarterly reset rates) and money market funds. On May 18, 2000, the Securities and Exchange Commission issued an order to the Marshall Funds that exempts certain securities lending activities from prohibitions under the Act. Under the terms of the exemptive order, (i) the Funds may pay a portion of net revenue to Marshall & Ilsley Trust Company N.A. (M&I Trust) for its services as securities lending agent, and (ii) cash collateral received for a loan of one Fund's securities may be invested jointly with collateral received for loans of other Funds' securities.

As of August 31, 2002, the value of securities loaned, the payable on collateral due to broker and the value of reinvested cash collateral securities were as follows:

Fund

    

Market Value
of Securities
Loaned

    

Payable on
Collateral
Due to Broker

    

Reinvested
Collateral
Securities

Equity Income Fund

  

$ 9,784,132

  

$ 10,101,512

  

$ 10,101,512

Large-Cap Growth & Income Fund

  

41,083,246

  

42,415,906

  

42,415,906

Mid-Cap Value Fund

  

31,619,934

  

32,645,623

  

32,645,623

Mid-Cap Growth Fund

  

61,883,685

  

63,891,070

  

63,891,070

Small-Cap Growth Fund

  

21,595,526

  

22,296,042

  

22,296,042

International Stock Fund

  

55,378,548

  

57,174,918

  

57,174,918

Government Income Fund

  

67,779,010

  

69,977,628

  

69,977,628

Intermediate Bond Fund

  

101,192,238

  

104,474,716

  

104,474,716

Individual reinvested cash collateral securities at August 31, 2002 are as follows:

Investments

    

Equity
Income
Fund

    

Large-Cap
Growth &
Income
Fund

    

Mid-Cap
Value
Fund

    

Mid-Cap
Growth
Fund

    

Small-Cap
Growth
Fund

    

International
Stock Fund

    

Government
Income
Fund

    

Intermediate
Bond Fund

    

Total
Provident Money Market Fund  

$1,153,395

  

$4,843,069

  

$3,727,493

  

$7,295,115

  

$2,545,773

  

$6,528,260

  

$7,990,080

  

$11,928,974

  

$46,012,159
Merrimac Money Market Fund  

1,058,811

  

4,445,913

  

3,421,820

  

6,696,877

  

2,337,007

  

5,992,910

  

7,334,853

  

10,950,738

  

42,238,929
Dreyfus Cash Management Plus MMKT  

840,459

  

3,529,059

  

2,716,158

  

5,315,821

  

1,855,059

  

4,757,028

  

5,822,230

  

8,692,433

  

33,528,247
Nationsbank Inst. Reserves  

25,017

  

105,045

  

80,849

  

158,229

  

55,217

  

141,597

  

173,303

  

258,737

  

997,994
Reserves Primary 15  

1,253,359

  

5,262,814

  

4,050,552

  

7,927,376

  

2,766,415

  

7,094,060

  

8,682,574

  

12,962,850

  

50,000,000
JP Morgan Master Note  

325,873

  

1,368,332

  

1,053,144

  

2,061,118

  

719,268

  

1,844,455

  

2,257,469

  

3,370,341

  

13,000,000
Metlife Funding Agreement  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000
Wisconsin Public Service Master Note  

250,672

  

1,052,563

  

810,110

  

1,585,475

  

553,283

  

1,418,812

  

1,736,515

  

2,592,570

  

10,000,000
Monumental Life Ins. Master Note  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000
Four Winds Funding LLC  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000
Key Bank N.A.  

250,770

  

1,052,973

  

810,426

  

1,586,094

  

553,498

  

1,419,365

  

1,737,192

  

2,593,582

  

10,003,900
Merrill Lynch & Co.  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000
Washington Mutual Bank FA  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000
American Honda Finance  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000
Bendix Comm Vehicle System  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000
Goldman Sachs Group  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000
Household Finance Corp.  

363,474

  

1,526,216

  

1,174,660

  

2,298,939

  

802,260

  

2,057,277

  

2,517,947

  

3,759,227

  

14,500,000
Questar Corp.  

106,536

  

447,339

  

344,297

  

673,827

  

235,145

  

602,995

  

738,019

  

1,101,842

  

4,250,000
American Express Centurion  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000
Wisconsin Energy Corp. Disc. C/P  

462,394

  

1,941,577

  

1,494,345

  

2,924,597

  

1,020,596

  

2,617,167

  

3,203,208

  

4,782,302

  

18,446,186

Restricted Securities--Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Funds or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Funds will not incur any registration costs upon such resales. The Intermediate Bond Fund's and Short-Term Income Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, the fair value as determined in good faith using methods approved by the Directors. The Money Market Fund's restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act.

Additional information on each illiquid restricted security held by the Money Market Fund at August 31, 2002 is as follows:

Security

    

Acquisition Date

    

Acquisition Cost

ABB Capital USA

  

11/14/2001

  

$75,000,000

GE Life & Annuity Funding Agreement

  

4/22/2000

  

75,000,000

Monumental Life Funding Agreement

  

8/2/1993-11/30/1993

  

40,000,000

Monumental Life Funding Agreement

  

10/15/1996

  

10,000,000

Monumental Life Funding Agreement

  

1/4/2000

  

25,000,000

Travelers Insurance Company

  

1/19/2001

  

50,000,000

Other--Investment transactions are accounted for on a trade date basis.

3. Capital Stock

The Articles of Incorporation permit the Directors to issue an indefinite number of full and fractional shares of common stock, par value $0.0001 per share. At August 31, 2002, the capital paid-in was as follows:

Fund

    

Capital Paid-In

Equity Income Fund

   $

330,512,179

Large-Cap Growth & Income Fund

    

297,111,440

Mid-Cap Value Fund

    

192,118,289

Mid-Cap Growth Fund

    

312,732,693

Small-Cap Growth Fund

    

109,857,402

International Stock Fund

    

417,966,476

Government Income Fund

    

373,456,503

Intermediate Bond Fund

    

657,078,646

Short-Term Income Fund

    

122,086,161

Money Market Fund

    

2,881,959,091

Transactions in capital stock were as follows:

 

 

   

Year Ended
August 31, 2002

 

   

Year Ended
August 31, 2001

 

 

 

Shares

 

   

 

Amount

 

 

Shares

 

   

 

Amount

 

EQUITY INCOME FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

3,954,436

 

 

$

52,646,401

 

 

3,753,785

 

 

$

56,629,266

 

Shares issued to shareholders in payment of distributions declared

 

1,256,721

 

 

 

17,467,488

 

 

303,974

 

 

 

4,592,039

 

Shares redeemed

 

(5,489,769

)

 

 

(75,258,161

)

 

(4,837,092

)

 

 

(72,875,722

)

Net change resulting from Investor Class of Shares transactions

 

(278,612

)

 

$

(5,144,272

)

 

(779,333

)

 

$

(11,654,417

)

EQUITY INCOME FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

169,201

 

 

$

2,319,923

 

 

126,934

 

 

$

1,916,805

 

Shares issued to shareholders in payment of distributions declared

 

13,715

 

 

 

190,165

 

 

2,779

 

 

 

41,925

 

Shares redeemed

 

(70,025

)

 

 

(959,162

)

 

(25,214

)

 

 

(380,859

)

Net change resulting from Advisor Class of Shares transactions

 

112,891

 

 

$

1,550,926

 

 

104,499

 

 

$

1,577,871

 

Net change resulting from Fund Share transactions

 

(165,721

)

 

$

(3,593,346

)

 

(674,834

)

 

$

(10,076,546

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LARGE-CAP GROWTH & INCOME FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

Shares sold

 

3,423,301

 

 

$

43,997,592

 

 

3,640,354

 

 

$

58,100,434

 

Shares issued to shareholders in payment of distributions declared

 

8,575

 

 

 

105,741

 

 

1,316,487

 

 

 

21,124,005

 

Shares redeemed

 

(5,616,030

)

 

 

(69,582,834

)

 

(3,357,098

)

 

 

(54,334,387

)

Net change resulting from Investor Class of Shares transactions

 

(2,184,154

)

 

$

(25,479,501

)

 

1,599,743

 

 

$

24,890,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LARGE-CAP GROWTH & INCOME FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

Shares sold

 

195,011

 

 

$

2,472,860

 

 

188,189

 

 

$

3,039,967

 

Shares issued to shareholders in payment of distributions declared

 

264

 

 

 

2,195

 

 

12,534

 

 

 

201,047

 

Shares redeemed

 

(73,575

)

 

 

(918,448

)

 

(41,770

)

 

 

(640,861

)

Net change resulting from Advisor Class of Shares transactions

 

121,700

 

 

$

1,556,607

 

 

158,953

 

 

$

2,600,153

 

Net change resulting from Fund Share transactions

 

(2,062,454

)

 

$

(23,922,894

)

 

1,758,696

 

 

$

27,490,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP VALUE FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

Shares sold

 

8,526,115

 

 

$

101,629,669

 

 

6,132,824

 

 

$

74,762,587

 

Shares issued to shareholders in payment of distributions declared

 

1,892,346

 

 

 

22,305,472

 

 

665,231

 

 

 

6,982,264

 

Shares redeemed

 

(5,564,460

)

 

 

(64,311,133

)

 

(3,039,567

)

 

 

(35,807,926

)

Net change resulting from Investor Class of Shares transactions

 

4,854,001

 

 

$

59,624,008

 

 

3,758,488

 

 

$

45,936,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP VALUE FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

192,014

 

 

$

2,284,297

 

 

92,317

 

 

$

1,097,181

 

Shares issued to shareholders in payment of distributions declared

 

28,716

 

 

 

338,441

 

 

7,508

 

 

 

78,933

 

Shares redeemed

 

(29,133

)

 

 

(343,354

)

 

(17,047

)

 

 

(201,444

)

Net change resulting from Advisor Class of Shares transactions

 

191,597

 

 

$

2,279,384

 

 

82,778

 

 

$

974,670

 

Net change resulting from Fund Share transactions

 

5,045,598

 

 

$

61,903,392

 

 

3,841,266

 

 

$

46,911,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP GROWTH FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

4,502,457

 

 

$

55,289,872

 

 

4,141,183

 

 

$

73,753,844

 

Shares issued to shareholders in payment of distributions declared

 

62,977

 

 

 

869,078

 

 

6,070,360

 

 

 

95,729,696

 

Shares redeemed

 

(7,078,048

)

 

 

(82,822,587

)

 

(5,654,242

)

 

 

(97,229,757

)

Net change resulting from Investor Class of Shares transactions

 

(2,512,614

)

 

$

(26,663,637

)

 

4,557,301

 

 

$

72,253,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP GROWTH FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

89,447

 

 

$

1,086,686

 

 

111,226

 

 

$

1,992,014

 

Shares issued to shareholders in payment of distributions declared

 

629

 

 

 

8,684

 

 

42,035

 

 

 

662,892

 

Shares redeemed

 

(33,654

)

 

 

(389,492

)

 

(30,405

)

 

 

(456,439

)

Net change resulting from Advisor Class of Shares transactions

 

56,422

 

 

 

$705,878

 

 

122,856

 

 

$

2,198,467

 

Net change resulting from Fund Share transactions

 

(2,456,192

)

 

$

(25,957,759

)

 

4,680,157

 

 

$

74,452,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMALL-CAP GROWTH FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

3,415,230

 

 

$

38,996,606

 

 

2,979,586

 

 

$

41,362,567

 

Shares issued to shareholders in payment of distributions declared

 

386,177

 

 

 

4,757,712

 

 

1,065,835

 

 

 

13,088,446

 

Shares redeemed

 

(3,291,813

)

 

 

(35,067,094

)

 

(4,143,430

)

 

 

(55,181,701

)

Net change resulting from Investor Class of Shares transactions

 

509,594

 

 

$

8,687,224

 

 

(98,009

)

 

$

(730,688

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMALL-CAP GROWTH FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

182,325

 

 

$

2,125,578

 

 

98,880

 

 

$

1,336,884

 

Shares issued to shareholders in payment of distributions declared

 

9,216

 

 

 

113,545

 

 

16,402

 

 

 

201,410

 

Shares redeemed

 

(103,222

)

 

 

(1,184,092

)

 

(18,911

)

 

 

(246,619

)

Net change resulting from Advisor Class of Shares transactions

 

88,319

 

 

$

1,055,031

 

 

96,371

 

 

$

1,291,675

 

Net change resulting from Fund Share transactions

 

597,913

 

 

$

9,742,255

 

 

(1,638

)

 

$

560,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

17,636,158

 

 

$

174,748,741

 

 

15,212,008

 

 

$

195,353,624

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

2,469,820

 

 

 

32,972,095

 

Shares redeemed

 

(19,632,221

)

 

 

(194,599,116

)

 

(16,197,785

)

 

 

(209,170,751

)

Net change resulting from Investor Class of Shares transactions

 

(1,996,063

)

 

$

(19,850,375

)

 

1,484,043

 

 

$

19,154,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

1,430,452

 

 

$

14,109,749

 

 

420,204

 

 

$

5,315,028

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

28,817

 

 

 

384,702

 

Shares redeemed

 

(1,312,246

)

 

 

(13,240,261

)

 

(251,427

)

 

 

(2,851,448

)

Net change resulting from Advisor Class of Shares transactions

 

118,206

 

 

$

869,488

 

 

197,594

 

 

$

2,848,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--INSTITUTIONAL CLASS

 

 

 

 

 

 

 

 

Shares sold

 

2,973,838

 

 

$

29,826,781

 

 

3,484,294

 

 

$

46,906,402

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

1,078,820

 

 

 

14,434,613

 

Shares redeemed

 

(2,217,162

)

 

 

(21,877,897

)

 

(2,661,048

)

 

 

(31,799,647

)

Net change resulting from Institutional Class of Shares transactions

 

756,676

 

 

$

7,948,884

 

 

1,902,066

 

 

$

29,541,368

 

Net change resulting from Fund Share transactions

 

(1,121,181

)

 

$

(11,032,003

)

 

3,583,703

 

 

$

51,544,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT INCOME FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

9,619,972

 

 

$

92,152,089

 

 

6,866,098

 

 

$

64,422,793

 

Shares issued to shareholders in payment of distributions declared

 

1,273,586

 

 

 

12,197,150

 

 

1,484,020

 

 

 

13,955,058

 

Shares redeemed

 

(11,955,890

)

 

 

(114,431,983

)

 

(7,287,114

)

 

 

(68,532,104

)

Net change resulting from Investor Class of Shares transactions

 

(1,062,332

)

 

$

(10,082,744

)

 

1,063,004

 

 

$

9,845,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT INCOME FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

316,703

 

 

$

3,026,512

 

 

107,402

 

 

$

1,009,391

 

Shares issued to shareholders in payment of distributions declared

 

13,493

 

 

 

129,303

 

 

9,562

 

 

 

89,985

 

Shares redeemed

 

(192,551

)

 

 

(1,841,093

)

 

(21,965

)

 

 

(206,127

)

Net change resulting from Advisor Class of Shares transactions

 

137,645

 

 

$

1,314,722

 

 

94,999

 

 

$

893,249

 

Net change resulting from Fund Share transactions

 

(924,687

)

 

$

(8,768,022

)

 

1,158,003

 

 

$

10,738,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERMEDIATE BOND FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

16,880,357

 

 

$

158,501,362

 

 

17,120,862

 

 

$

159,975,612

 

Shares issued to shareholders in payment of distributions declared

 

1,756,483

 

 

 

16,480,250

 

 

1,847,000

 

 

 

17,238,638

 

Shares redeemed

 

(19,133,698

)

 

 

(179,853,591

)

 

(18,527,594

)

 

 

(173,100,999

)

Net change resulting from Investor Class of Shares transactions

 

(496,858

)

 

$

(4,871,979

)

 

440,268

 

 

$

4,113,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERMEDIATE BOND FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

291,333

 

 

$

2,732,845

 

 

143,925

 

 

$

1,343,401

 

Shares issued to shareholders in payment of distributions declared

 

18,596

 

 

 

174,431

 

 

14,177

 

 

 

132,442

 

Shares redeemed

 

(198,831

)

 

 

(1,866,218

)

 

(33,510

)

 

 

(313,102

)

Net change resulting from Advisor Class of Shares transactions

 

111,098

 

 

$

1,041,058

 

 

124,592

 

 

$

1,162,741

 

Net change resulting from Fund Share transactions

 

(385,760

)

 

$

(3,830,921

)

 

564,860

 

 

$

5,275,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INCOME FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

5,454,176

 

 

$

51,537,360

 

 

4,478,636

 

 

$

42,170,518

 

Shares issued to shareholders in payment of distributions declared

 

353,190

 

 

 

3,323,105

 

 

458,652

 

 

 

4,314,479

 

Shares redeemed

 

(6,890,903

)

 

 

(64,691,429

)

 

(5,022,532

)

 

 

(47,251,221

)

Net change resulting from Investor Class of Shares transactions

 

(1,083,537

)

 

$

(9,830,964

)

 

(85,244

)

 

$

(766,224

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INCOME FUND--ADVISOR CLASS (1)

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

133,339

 

 

$

1,247,308

 

 

14,727

 

 

$

138,907

 

Shares issued to shareholders in payment of distributions declared

 

2,153

 

 

 

20,188

 

 

317

 

 

 

3,001

 

Shares redeemed

 

(58,185

)

 

 

(542,360

)

 

(4,889

)

 

 

(46,203

)

Net change resulting from Advisor Class of Shares transactions

 

77,307

 

 

$

725,136

 

 

10,155

 

 

$

95,705

 

Net change resulting from Fund Share transactions

 

(1,006,230

)

 

$

(9,105,828

)

 

(75,089

)

 

$

(670,519

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

5,427,591,574

 

 

$

5,427,591,574

 

 

5,349,844,467

 

 

$

5,349,844,467

 

Shares issued to shareholders in payment of distributions declared

 

11,415,196

 

 

 

11,415,196

 

 

22,470,409

 

 

 

22,470,409

 

Shares redeemed

 

(5,278,253,683

)

 

 

(5,278,253,683

)

 

(5,451,687,216

)

 

 

(5,451,687,216

)

Net change resulting from Investor Class of Shares transactions

 

160,753,087

 

 

 $

160,753,087

 

 

(79,372,340

)

 

$

(79,372,340

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

281,645,796

 

 

$

281,645,796

 

 

440,122,578

 

 

$

440,122,578

 

Shares issued to shareholders in payment of distributions declared

 

2,132,999

 

 

 

2,132,999

 

 

5,940,215

 

 

 

5,940,215

 

Shares redeemed

 

(297,823,697

)

 

 

(297,823,697

)

 

(459,131,150

)

 

 

(459,131,150

)

Net change resulting from Advisor Class of Shares transactions

 

(14,044,902

)

 

 $

(14,044,902

)

 

(13,068,357

)

 

$

(13,068,357

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--INSTITUTIONAL CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

4,304,882,665

 

 

$

4,304,882,665

 

 

3,217,717,900

 

 

$

3,217,717,900

 

Shares issued to shareholders in payment of distributions declared

 

2,761,641

 

 

 

2,761,641

 

 

2,009,341

 

 

 

2,009,341

 

Shares redeemed

 

(4,312,138,653

)

 

 

(4,312,138,653

)

 

(2,446,906,796

)

 

 

(2,446,906,796

)

Net change resulting from Institutional Class of Shares transactions

 

(4,494,347

)

 

$

(4,494,347

)

 

772,820,445

 

 

$

772,820,445

 

Net change resulting from Fund Share transactions

 

142,213,838

 

 

$

142,213,838

 

 

680,379,748

 

 

$

680,379,748

 

(1) For the period from October 31, 2000 (start of performance) to August 31, 2001.

4. Investment Adviser Fee and Other Transactions with Affiliates

Investment Adviser Fee--M&I Investment Management Corp., the Funds' investment adviser (the "Adviser"), receives for its services an annual investment adviser fee based on a percentage of each Fund's average daily net assets as listed below. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Fund

    

Annual Rate

Equity Income Fund

  

0.75%

Large-Cap Growth & Income Fund

  

0.75%

Mid-Cap Value Fund

  

0.75%

Mid-Cap Growth Fund

  

0.75%

Small-Cap Growth Fund

  

1.00%

International Stock Fund

  

1.00%

Government Income Fund

  

0.75%

Intermediate Bond Fund

  

0.60%

Short-Term Income Fund

  

0.60%

Money Market Fund

  

0.15%

International Stock Fund's sub-adviser is BPI Global Asset Management LLP (the "Sub-Adviser"). The Adviser compensates the Sub-Adviser based on the level of average aggregate daily net assets of International Stock Fund.

Administrative Fee--M&I Trust under the Administrative Services Agreement, provides the Funds with administrative personnel and services. The fee paid to M&I Trust is based on each Fund's average daily net assets as follows:

Maximum Fee

     

Fund's Average Daily Net Assets

0.100 %

  

on the first $250 million

0.095 %

  

on the next $250 million

0.080 %

  

on the next $250 million

0.060 %

  

on the next $250 million

0.040 %

  

on the next $500 million

0.020 %

  

on assets in excess of $1.5 billion

Federated Administrative Services is the sub-administrator and will be paid by M&I Trust, not by the Funds.

Distribution Services Fee--The Funds have adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Funds will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Funds to finance activities intended to result in the sale of shares of the Funds' Advisor Class of Shares. The Plan provides that the Funds may incur distribution expenses up to 0.25% of the average daily net assets of Funds' Advisor Class of Shares (except Money Market Fund's Advisor Class of Shares which may accrue up to 0.30%) annually, to compensate FSC. Effective October 31, 2002, the principal distributor will change to Edgewood Services, Inc.

Shareholder Services Fee--Under the terms of a Shareholder Services Agreement with Marshall Investor Services ("MIS"), each Fund will pay MIS up to 0.25% of average daily net assets of the Funds' Investor and Advisor Class of Shares for the period. The fee paid to MIS is used to finance certain services for shareholders and to maintain shareholder accounts. MIS may voluntarily choose to waive any portion of its fee. MIS can modify or terminate this voluntary waiver at any time at its sole discretion.

Transfer and Dividend Disbursing Agent Fees and Expenses--Federated Services Company ("FServ"), through its subsidiary, Federated Shareholders Services Company ("FSSC"), serves as transfer and dividend disbursing agent for the Funds. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees--FServ maintains the Funds' accounting records for which it receives a fee. The fee is based on the level of each Fund's average daily net assets for the period, plus out-of-pocket expenses.

Custodian Fees--M&I Trust is the Funds' custodian. M&I Trust receives fees based on the level of each Fund's average daily net assets for the period. The custodian also charges a fee in connection with securities lending activities of the Funds.

General--Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees, of one or more of the above companies.

5. Investment Transactions

Purchases and sales of investments, excluding short-term securities and long-term U.S. government securities, for the year ended August 31, 2002, were as follows:

Fund

    

Purchases

    

Sales

Equity Income Fund

  

$ 187,833,392

  

$ 207,860,220

Large-Cap Growth & Income Fund

  

210,692,200

  

201,663,507

Mid-Cap Value Fund

  

142,577,142

  

83,402,604

Mid-Cap Growth Fund

  

426,331,121

  

434,359,755

Small-Cap Growth Fund

  

292,062,024

  

281,564,405

International Stock Fund

  

265,811,390

  

271,464,009

Intermediate Bond Fund

  

319,407,757

  

287,138,111

Short-Term Income Fund

  

14,165,600

  

26,783,404

Purchases and sales of long-term U.S. government securities, for the year ended August 31, 2002, were as follows:

Fund

    

Purchases

    

Sales

Government Income Fund

  

$ 300,936,320

  

$ 338,737,966

Intermediate Bond Fund

  

786,625,210

  

822,184,907

Short-Term Income Fund

  

47,415,232

  

35,237,227

6. Line of Credit

Marshall Funds, Inc., on behalf of its respective Funds (except for the Money Market Fund) entered into a $50,000,000 unsecured, committed revolving line of credit ("LOC") agreement with State Street Bank & Trust Company. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate of 0.50% per annum over the Federal Funds Rate. The LOC includes a commitment fee of 0.10% per annum on the daily unused portion. The Funds did not utilize the LOC during the year ended August 31, 2002.

FEDERAL INCOME TAX INFORMATION

The Funds hereby designate the following distributions as capital gain distributions for the year ended August 31, 2002:

Equity Income Fund

    

$

1,613,873

Mid-Cap Value Fund

  

 

12,780,149

Mid-Cap Growth Fund

  

 

885,770

Small-Cap Growth Fund

  

 

4,937,939

 

To the Board of Directors and Shareholders of Marshall Funds, Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Marshall Equity Income Fund, the Marshall Large-Cap Growth & Income Fund, the Marshall Mid-Cap Value Fund, the Marshall Mid-Cap Growth Fund, the Marshall Small-Cap Growth Fund, the Marshall International Stock Fund, the Marshall Government Income Fund, the Marshall Intermediate Bond Fund, the Marshall Short-Term Income Fund, and the Marshall Money Market Fund (ten of the portfolios within Marshall Funds, Inc.) (the "Funds"), as of August 31, 2002, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the statement of cash flows for the Marshall Government Income Fund for the year then ended, and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is t

[Logo of Marshall Funds]

T h e  M a r s h a l l  F u n d s  F a m i l y

Annual Report

T h e  I n v e s t o r  C l a s s  o f  S h a r e s
(Class Y)

  • Marshall Equity Income Fund
  • Marshall Large-Cap Growth & Income Fund
  • Marshall Mid-Cap Value Fund
  • Marshall Mid-Cap Growth Fund
  • Marshall Small-Cap Growth Fund
  • Marshall International Stock Fund
  • Marshall Government Income Fund
  • Marshall Intermediate Bond Fund
  • Marshall Intermediate Tax-Free Fund
  • Marshall Short-Term Income Fund
  • Marshall Money Market Fund

A U G U S T  3 1 ,  2 0 0 2

Table of Contents

President's Message      1
Commentaries    
Marshall Equity Income Fund   2
Marshall Large-Cap Growth & Income Fund   4
Marshall Mid-Cap Value Fund   6
Marshall Mid-Cap Growth Fund   8
Marshall Small-Cap Growth Fund   10
Marshall International Stock Fund   12
Marshall Government Income Fund   14
Marshall Intermediate Bond Fund   16
Marshall Intermediate Tax-Free Fund   18
Marshall Short-Term Income Fund   20
Marshall Money Market Fund   22
Financial Information    
Portfolio of Investments   23
Marshall Equity Income Fund   23
Marshall Large-Cap Growth & Income Fund   25
Marshall Mid-Cap Value Fund   27
Marshall Mid-Cap Growth Fund   29
Marshall Small-Cap Growth Fund   31
Marshall International Stock Fund   32
Marshall Government Income Fund   35
Marshall Intermediate Bond Fund   37
Marshall Intermediate Tax-Free Fund   40
Marshall Short-Term Income Fund   43
Marshall Money Market Fund   46
Statements of Assets and Liabilities   50
Statements of Operations   52
Statements of Changes in Net Assets   54
Statement of Cash Flows   58
Financial Highlights   60
Notes to Financial Statements   62
Directors & Officers   77

[Logo of Marshall Funds]

Dear Marshall Funds Shareholder:

Like a deer caught in headlights, uncertain whether to move forward or backward, run or jump (or simply stay perfectly still as on-coming traffic approaches), many investors are having an uneasy feeling as they open their recent investment account statements...if they open them at all. If you feel that way, we suggest now is actually the time for action.

When you began saving and investing, we expect that you had a plan developed either on your own or with a trusted financial adviser. A good investment plan is continuous and incorporates your current financial goals, time horizon, willingness to accept risk of loss, and an execution strategy.

Now is always the best time to re-evaluate your investment plan for adequate diversification, regardless of the direction of the markets. Our prior letters to shareholders have repeated that message:

  • 1999 -- "U.S. investors continue to enjoy one of the strongest economic periods on record...We encourage you to evaluate your investments to ensure your portfolio is well diversified and consistent with your long-term goals."
  • 2000 -- "The message for our shareholders remains consistent: Diversification through broad asset allocation may be the primary success factor in reaching your financial goals."
  • 2001 -- "Every investor who has committed to a broadly diversified investment program, including attention to large, mid and small cap stocks; growth and value investment styles; equities and fixed income securities; and domestic and international equities has been rewarded with competitive returns with less volatility."

This year, we decided that a picture might convey the message more effectively. To make our point, we focus on our own fund family. We present three hypothetical $100,000 portfolios from September 1, 1997 to August 31, 2002, consisting of the Mid-Cap Growth Fund alone as the most volatile portfolio, the Money Market Fund alone as the least volatile portfolio, and an evenly divided portfolio of the entire eleven fund Marshall Fund family. We calculated total return performance with the reinvestment of dividends and capital gains and without any sales charges.

While past performance is not indicative of future results, we hope the benefits of diversification are clearly evident in the portfolio of the entire Marshall Fund family. A fully diversified portfolio allows you to participate in the expected long-term benefits of the market with less volatility. The exact mix of investments should be determined by your personal plan, but regardless of the approach that you take, remember to continue saving, continue investing, and continue diversifying.

As always, thank you for your investment in the Marshall Funds.

Sincerely,

/s/ John M. Blaser

John M. Blaser
President

Annual Report -- Commentary

 

David J. Abitz, CFA

Marshall Equity Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (13.16)%.* In comparison, the Lipper Equity Income Funds Index (LEIFI) returned (13.47)%, while the Standard & Poor's 500 Index (S&P 500) returned (17.99)%.**

Factors Affecting Performance

Over the past year, the Fund outperformed the LEIFI as well as the S&P 500. The Fund's focus on defensive sectors that pay attractive dividends leads us to stocks in groups like consumer staples that are less affected by the economic cycle. In addition, our process identified regional banks and insurance stocks, which outperformed the market as a whole. Regional banks were able to take advantage of the wide spread between lending rates and cost of funds without the risk exposure of money center banks. Insurance companies benefited from firmer pricing due to increased risk after the September 11 terrorist attacks, as well as their large bond portfolios, which have significantly outperformed stocks. Finally, the Fund benefited from a significant underweight in technology stocks, since the Fund's strategy is to own shares of companies that pay above- average dividends.

Telecommunications services continued to lag the market, as the industry struggled to work down overcapacity. In addition, utilities performed poorly, as investors, concerned about Enron's sudden bankruptcy, scrutinized companies for their energy trading practices. Finally, healthcare stocks, particularly pharmaceuticals, posted poor results due to patent expirations and delays in FDA approvals. However, we see significant value in this group at current price levels.

Looking Ahead

Given the difficult market environment of the past two years, we believe that investors have more realistic expectations for company fundamentals and stock prices than they did in the late 1990s. This more rational perspective on investing has driven investors to more traditional approaches such as value investing, which has shown increased relevance in today's market environment. This conservative focus favors our equity income discipline, since a portion of total return comes in the form of dividend income that is earned regardless of market fluctuations. Dividend income is not subject to investor emotions, market cycles, or other biases of the environment. The dividend, which represents a more reliable portion of the Fund's total return, provides a relatively stable component to total return. We continue to feel confident in our quantitatively driven approach, which is to provide investors with reduced low risk yet competitive long-term equity returns.

•Marshall Equity Income Fund

 

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The S&P 500 and the LEIFI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

Annual Report -- Commentary

William J. O'Connor, CFA

Marshall Large-Cap Growth & Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (22.94)%.* In comparison, the Lipper Large-Cap Core Fund Index (LLCCFI) returned (16.63)%, while the Standard & Poor's 500 Index (S&P 500) returned (17.99)%.**

Factors Affecting Performance

A number of factors impacted the Fund's performance during the fiscal year. True to its discipline, the Fund concentrates its efforts on the largest 200 stocks in the S&P 500, and the largest stocks in the index performed, on average, much worse than the smallest 300 companies. Second, while the Fund is a blend of the two investment styles, value clearly outperformed growth stocks, and we were better positioned for an earlier economic recovery.

Another factor adversely affecting the Fund was our concern for the consumer after the September 11 terrorist attacks, resulting in an underweight of the retailing sector. In fact, retailing and other consumer discretionary stocks performed relatively well.

We underestimated the positive impact of lower oil prices, a tax cut and mortgage refinancing proceeds on consumer spending. Indeed, the Fund's holdings in Wal-Mart Stores, Inc. (2.51% of net assets), Lowe's Cos., Inc. (1.42% of net assets) and Kohls Corp. (2.55% of net assets) performed well. However, the Fund's investments in the more economically sensitive sectors such as advertising, brokerage and technology were not rewarded. The pace of the economic recovery was much slower than we expected, despite the fact that the economy was emerging from one of the worst-ever corporate profit declines. Finally, the Fund's investment in Tyco International Ltd. significantly hurt performance, as revelations involving alleged managment wrongdoing severely punished the stock.

Looking Ahead

Investors are paying a historically high valuation premium versus the market overall for the predictable earnings found in most defensive sectors, such as foods, cosmetics and defense companies. As such, the Fund remains under exposed to these sectors. We maintain our emphasis on cyclical companies in the portfolio, which has moderated the performance on the Fund over the past year. Emerging from one of the worst earnings declines in 50 years, the pace of earnings recovery has certainly been disappointing. We feel more investment opportunities exist in high quality companies, selling at reasonable valuations with cyclical exposure.

•Marshall Large-Cap & Income Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The S&P 500 and the LLCCFI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The S&P 500 is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

Annual Report -- Commentary

Matthew B. Fahey

Marshall Mid-Cap Value Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (4.25)%.* In comparison, the Russell Mid-Cap Value Index (RMCVI) returned (4.87)% and the Lipper Mid-Cap Value Funds Index (LMCVFI) returned (9.38)%, while the Standard & Poor's Mid-Cap 400 Index (S&P 400) returned (9.23)%.**

Factors Affecting Performance

The Fund's outperformance of its benchmarks this past year had little to do with betting on specific sectors or industries. Instead, the Fund outperformed because of stock selection through its bottom up analysis focusing on investments irrespective of economic or political climate. The stocks that improved during the past year included a very diverse collection of companies that shared one primary attribute: investors had low expectations for improved performance. Yet, many of the holdings did have improved fundamentals, which drove the stock prices higher.

Despite the difficult overall market, the Fund invested in three stocks that increased more than 50% in value during the fiscal year--Newell Rubbermaid, Inc. (1.64% of net assets), Boston Scientific Corp. (1.02% of net assets) and Northrop Grumman Corp. (1.53% of net assets). In the case of Newell Rubbermaid, Inc., new management boosted operating margins by refocusing the company on its core businesses and growing revenue. Meanwhile, Boston Scientific Corp., a medical device company, increased its profitability and pipeline with its internally developed coronary stent platform and drug eluting stent trials. Whereas Newell Rubbermaid Inc. and Boston Scientific Corp. are both turnaround stories being fixed internally, Northrop Grumman Corp. shares benefited from a macroeconomic factor: the war on terrorism.

The Fund's performance was still modestly negative--although much less so than the overall stock market. For example, Keane, Inc. (1.34% of net assets), an information technology consulting firm, fell 52% because the demand for its services declined dramatically. Kroger Co., Inc. (2.03% of net assets) declined 32% primarily because the pricing environment in the supermarket industry has become very intense.

Looking Ahead

Our continuing strategy is to look for strong companies that have temporarily fallen out of favor with investors. We must then become convinced of two factors: that the company can overcome its current problems and will remain only temporarily out of favor; and that the company is financially strong enough through its balance sheet and cash flow to support the business until it is eventually repaired. That's one reason why we continue to hold Keane Inc., which is a company with excellent management and a strong balance sheet that has the wherewithal to survive the downturn in technology spending. We also see a turnaround emerging at Bausch & Lomb, Inc. (2.28% of net assets). The eye care company has hired new management to improve operating margins. In addition, we believe the depressed shares of steel-maker Nucor Corp. (1.75% of net assets) will benefit from an improving economy.

•Marshall Mid-Cap Value Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The RMCVI, the LMCVFI and the S&P 400 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The RMCVI, measures the performance of the those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective category indicated. The S&P 400 is a capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. The Fund has elected to change the benchmark index from the S&P 400 to the RMCVI. The RMCVI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

Annual Report -- Commentary

Michael D. Groblewski, CFA

Marshall Mid-Cap Growth Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (32.01)%.* In comparison, the Russell Mid-Cap Growth Index (RMCGI) returned (23.38)% and the Lipper Mid-Cap Growth Funds Index (LMCGFI) returned (25.70)%, while the Standard & Poor's Mid-Cap 400 Index (S&P 400) returned (9.23)%.**

Factors Affecting Performance

The past year was a challenge for our nation and equity markets alike. Terrorist attacks of September 11, recession, corporate scandals, and the threat of war consumed the thoughts and actions of America. These events affected each of our lives in varying degrees, and fueled the worst bear market in more than 70 years. During this time, growth investors have been particularly challenged. As market forces took apart virtually every stock, portfolios similar to the Fund were hurt more than average. We were particularly hurt by our holding in cable and healthcare in an attempt to invest in companies with a stable outlook and pricing power.

As anxiety ruled the market, we continued to search for companies with solid business models, above-average growth prospects, and the balance sheets necessary for these companies to survive and ultimately thrive. One bright spot during the past year was our holdings in PetSmart Inc. As America stayed closer to home, PetSmart, Inc., a specialty pet retailer, remodeled stores and freshened up its product and service offerings. The result was a jump in same store sales, increased margins, and renewed interest in the company's shares. We eventually sold our position after the stock more than doubled to reach our price target.

Everyday we continue to wade through a volatile market in search of our next PetSmart, Inc. Market softness has given us the opportunity to accumulate positions in industry leaders such as AdvancePCS (1.65% of net assets), PartnerRe Ltd. (3.28% of net assets), Radio One, Inc. (2.03% of net assets) and Stage Stores, Inc. (3.54% of net assets). We believe each have excellent growth projects and have the potential to generate significant cash flow.

Looking Ahead

We remain optimistic on the economic recovery against a backdrop of low interest rates, historically low unemployment levels, and a consumer that refuses to quit spending. Therefore, we have a significant portion of the Fund in economically sensitive stocks, with the largest component in consumer discretionary names. Additionally, we own names that should benefit from the very issues that continue to hinder the pace of economic growth. These include energy and insurance stocks, which are both experiencing strong price increases. Therefore, we believe, regardless of the pace of the economic recovery, we are positioning the Fund in above-average growth opportunities at reasonable prices.

•Marshall Mid-Cap Growth Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The RMCGI, the LMCGFI and the S&P 400 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The RMCGI measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values. Lipper Indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated. The S&P 400 is a capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. The Fund has elected to change the benchmark index from the S&P 400 to the RMCGI. The RMCGI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

Annual Report -- Commentary

Sean A. McLeod, CFA

Marshall Small-Cap Growth Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (27.23)%.** In comparison, the Russell 2000 Growth Index (Russell 2000 GI) returned (26.02)% and the Lipper Small-Cap Growth Funds Index (LSCGI) returned (24.37)%, while the Russell 2000 Index (Russell 2000) returned (15.44)%.***

Factors Affecting Performance

The past twelve months have been difficult, particularly for growth stocks. Investors traditionally have paid for growth stocks in terms of a multiple of the company's earnings or cash flow. Unfortunately, investors have had to deal with terrorism, recession, corporate malfeasance, and the threat of war. As a result, not only have earnings declined due to the recession, but the "multiple" investors are willing to pay has declined. In essence, investors have increased their "risk premium" for the foreseeable future, which lowers the amount they are willing to pay for a growth stock. We expect economic growth to improve along with earnings, but investor confidence remains key to an improving market environment.

Looking Ahead

The portfolio is positioned to take advantage of an improving business environment. We are overweight in economically sensitive sectors such as consumer cyclicals, energy and technology, while underweight in defensive sectors such as consumer staples and financials. As an example, we have been increasing our exposure to the teen retailers. Not only do we like the demographics--the teen population is growing faster than the overall population and has increasing disposable incomes, at current valuations, the stocks are pricing in a long-lasting recession, providing an attractive entry point. Energy is another area of focus, as the sector should benefit from a lack of new supply of natural gas, which should result in higher equilibrium prices, to the benefit of energy producers.

We continue to invest in sectors benefiting from attractive secular trends, and in companies with lasting competitive advantages, strong balance sheets, and good management teams. We feel that this approach will result in outperformance over the business cycle.

•Marshall Small-Cap Growth Fund

* Small company stocks may be less liquid and subject to greater volatility than large capitalization stocks.

** Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that the shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

*** The Russell 2000 GI, the LSCGI and the Russell 2000 are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The Russell 2000 GI measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. Lipper indexes are an average of the total return of 30 largest mutual funds designated by Lipper, Inc., as falling into the respective categories indicated. The Russell 2000 is an index of common stocks whose market capitalizations generally range from $200 million to $5 billion. The Fund has elected to change the benchmark index from the Russell 2000 to the Russell 2000 GI. The Russell 2000 GI is more representative of the securities typically held by the Fund. This change will be effective January 1, 2003.

†The Marshall Small-Cap Growth Fund is the successor to a collective trust fund. The quoted performance data includes performance of the collective trust fund for periods before the Fund's registration statement became effective on August 30, 1996, as adjusted to reflect the Fund's anticipated expenses. The collective trust fund was not registered under the Investment Company Act of 1940 ("1940 Act") and therefore was not subject to certain diversification requirements and investment restrictions imposed by the 1940 Act and the Internal Revenue Code. If the collective trust fund had been subject to those restrictions registered under the 1940 Act, the performance may have been adversely affected.

Annual Report -- Commentary

Daniel R. Jaworski, CFA

Marshall International Stock Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of (13.23)%.** In comparison, the Lipper International Funds Index (LIFI) returned (12.50)%, while the Morgan Stanley Capital International Europe, Australasia and Far East Index (EAFE) returned (14.95)%.***

Factors Affecting Performance

International markets fared no better than the U.S. stock market, as economic growth remained sluggish throughout Europe and Japan. The decline in equities was broad on both a geographic and industrial basis. Of the 21 developed countries included in the Fund's benchmark, the EAFE, only two generated positive equity market returns over the last 12 months. Also, all 10 of the major industrial sectors generated negative returns for the reporting period. While emerging markets in Asia showed signs of life during part of the reporting period, most of those gains evaporated as the fiscal year came to a close. However, U.S. investors in overseas markets benefited from a weakened dollar, as foreign currencies translated into more dollars by the end of the reporting period.

Compared to the EAFE, the Fund benefited from better stock selection in the technology and telecommunications sectors, avoiding some of the worst performing companies in the index. Indeed, one of the Fund's best performers was Telecom Italia SpA (1.24% of net assets), which has relatively low debt and strong earnings. In addition, the Fund owned shares of Samsung Electronics Co. (1.96% of net assets), a stock that nearly doubled during the year on the strength of strong earnings momentum. Since Samsung Electronics Co. is based in South Korea and thus is part of emerging markets, it is not included in the EAFE. As of August 31, 2002, emerging market companies accounted for about 13% of the Fund's holdings.|

Another relatively good area for the Fund was the consumer sector, with such winning stocks as Hyundai Motor Co., Ltd. (0.89% of net assets) generating a strong contribution to total return. A low interest rate environment certainly benefited Hyundai Motor Co., Ltd., as well as its increasing market share and reputation for quality automobiles at reasonable prices. In financial services, Bank of Ireland (1.99% of net assets) continues to generate excellent returns, boosted by a relatively healthy Irish economy and a scarcity of competitors.

Looking Ahead

We continue to search for companies that are likely to benefit from an economic pickup, including banks and highly focused industrial companies. While we have not invested heavily in pharmaceuticals due to concerns about competition from generic drugs and delayed FDA approvals, these stocks have declined in price to the point where they appear attractive. In technology, we are still concerned about overcapacity and weak demand.

In terms of geographical allocation, we remain cautious on Japan, focusing our exposure in a few companies such as Nissan Motors Co., Ltd. (2.57% of net assets) and Sega Enterprises (2.26% of net assets) that have demonstrated a concern for shareholder value. In Europe, while economic growth remains slower than expected, we are increasing our holdings in industrial sectors where there has been consolidation, buying stocks with strong returns on capital and modest price/earnings multiples. Meanwhile, emerging markets continue to provide the best opportunity for economic growth, especially with companies that meet our investment criteria of reasonably priced, worldwide industry leaders.

•Marshall International Stock Fund

Annual Report -- Commentary

Jason D. Weiner, CFA

Marshall Government Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 7.50%.* In comparison, the Lipper U.S. Mortgage Funds Index (LUSMI) returned 7.57%, while the Lehman Brothers Mortgage-Backed Securities Index (LMI) returned 8.20%.**

Factors Affecting Performance

Interest rates declined significantly as investors sought refuge in Treasury securities during a rather tumultuous fiscal year. This flight to quality was precipitated by the horrible September 11 attacks. In response, the Federal Reserve Board continued to aggressively reduce short-term interest rates to the lowest level in 40 years. As the year progressed, investors faced episodes of corporate malfeasance at large corporations. At the same time, continued geopolitical dangers and threats of terrorism unnerved investors. This difficult environment caused investors to favor the relative safety of Treasury securities, while they questioned the state of the U.S economic recovery. This tremendous demand for Treasuries pushed yields to historically low levels. Therefore, bond investors were rewarded with solid returns during the last 12 months.

The historically low interest rate environment combined with an exceptionally strong housing market has increased the probability of a major refinancing boom. As a result, prepayment fears have pervaded the mortgage market, which caused these securities to lag the strong performance of U.S Treasuries. Our emphasis on call-protected securities such as Treasury and Agency debentures added significantly to portfolio performance.

Looking Ahead

Over the next few months, we expect to observe prepayment speeds that exceed the market consensus. This will dampen mortgage performance relative to other call-protected sectors of the bond market such as Treasury and Agency securities. We will continue to underweight mortgage product with the anticipation of a substantial increase in prepayment risk. Therefore, we favor Treasuries, agency debentures, and highly seasoned mortgage product, allowing the Fund to benefit more directly from declining interest rates.

We believe the economy will eventually recover in 2003, resulting in a rate environment more supportive of mortgage securities' valuations. We will look to opportunistically add to our mortgage position once this refinancing activity subsides and there are clear signs of an economic recovery. In the near term, we remain cautious about the geopolitical landscape and the condition of the economy. Potential terrorism, corporate governance, and the threat of war in Iraq continue to encourage a conservative portfolio approach. Hopefully, these concerns will fade from public sentiment, but it will take time.

•Marshall Government Income Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The LMI and the LUSMI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The LMI is an index comprised of fixed rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corp. (FHLMC) and the Federal National Mortgage Association (FNMA). Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

Annual Report -- Commentary

Jason D. Weiner, CFA

Marshall Intermediate Bond Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 4.70%.* In comparison, the Lipper Short/Intermediate Investment Grade Bond Funds Index (LSIBF) returned 5.34%, while the Lehman Brothers Government/Credit Intermediate Index (LGCI) returned 7.74%.**

Factors Affecting Performance

Fixed income investors achieved strong portfolio returns as interest rates fell precipitously over the last 12 months. The Federal Reserve Board aggressively reduced short-term interest rates to historically low levels in the wake of the September 11 attacks. The rather pronounced decline in interest rates across the yield curve was caused by a significant flight to quality. Investors favored the relative safety of U.S. Treasuries due to heightened concerns over corporate malfeasance, potential terrorism, geopolitical conflicts and signs of a sputtering economy. This challenging environment caused investors to demand higher risk premiums for both equity investments and corporate credit.

Although most sectors of the bond market produced solid returns during our fiscal year, corporate bond investors faced a very difficult market. The corporate bond market became bifurcated as certain industries' corporate debt maintained its value while other industries' debt remained under severe pressure. The rapid decline in credit quality among companies in the utility, telecommunications, and cable/media sectors highlight the pitfalls that await over-leveraged companies that fail to grow in a lower inflationary world. Generally, we were able to perform in line with our competitors due to a high quality, well-diversified approach to the corporate market. Additionally, sound security selection supported by thorough credit analysis and adept sector allocation resulted in additional total return for the Fund.

Looking Ahead

We expect the economy will rebound in 2003, supporting corporate and mortgage bond valuations. We especially believe corporate bonds offer compelling return potential, but today's arduous market conditions warrant a cautious approach. We will look to opportunistically add to our corporate bond allocation when the economy appears to be in a sustainable recovery. In the near term, prudence is warranted given the looming geopolitical dangers, corporate governance issues, and the threat of war with Iraq. This type of environment requires a disciplined, well-diversified portfolio approach focusing on high quality sectors such as mortgage-backed, asset-backed, and agency securities to complement our high quality corporate bond allocation. The negative sentiment that has pervaded the financial markets will show signs of abatement, but this will take time.

•Marshall Intermediate Bond Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The LGCI and the LSIBF are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The LGCI is an index comprised of government and corporate bonds rated BBB or higher with maturities between 1-10 years. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

Annual Report -- Commentary

John D. Boritzke, CFA

Marshall Intermediate Tax-Free Fund

Fund Performance

For the 12-month period ended August 31, 2002, the Fund provided a return of 6.12%.* For the same period, the Lehman Brothers 7-Year General Obligations Bond Index (L7GO) increased 6.72% and the market as represented by the Lipper Intermediate Municipal Funds Index (LIMI) returned 5.43%.**

Factors Affecting Performance

The Fund's fiscal year encompassed a period of dramatic steepening of the municipal yield curve. For the first six months of the fiscal year, influenced primarily by the cumulative 175 basis points of Federal Reserve Board easing, short-term municipal bond yields dropped dramatically. Longer term yields (20 years +) remained unchanged. As the Fund is intermediate in nature, we were able to benefit from decreasing yield levels. The downward yield shift served to add several percentage points of return above and beyond the income collected from Fund holdings. The boost to return was particularly beneficial during the second half of the Fund's fiscal year, when yield declines spread among the longer portions of the yield curve.

Strategically, within the Fund we have maintained a significant weighting in municipal bond maturities ranging from 7 to 15 years. Not only does this enable the Fund to pursue higher yields due to the extreme steepness of the yield curve, but also provide growth potential as recent bond market rallies foster price appreciation.

Looking Ahead

Yield levels for 5-, 10- and 30-year municipal bonds have all touched new lows recently. Normally, this would result in buyer resistance. Not this time. Pitifully low returns on cash investments force yield hungry buyers to consider buying longer maturity paper. Record levels of new issue municipal bond supply are being met with extremely strong demand. We have concentrated on purchasing premium bond structures that will help cushion the Fund when the bond market inevitably stops rallying. While nobody can consistently forecast the level of interest rates, it appears likely that interest rate cycle lows are near. For now, municipal bonds are outperforming all other sectors of the bond market but Treasury paper, with less volatility.

There can be no doubt that equity market jitters have forced many investors to reconsider the benefit of owning municipal bonds. The Fund has been well positioned to prosper from newly created demand as buyers seek lower risk alternatives in the financial market. To some extent the bond market is captive to stock market movements, with economic statistics being relegated to secondary consideration. It is no coincidence that the strongest bond performance days have usually occurred during equity market turmoil. This scenario is likely to continue, as the ebb and flow of investor dollars seeks the best return.

We believe that a key to superior performance will be to maintain a high quality profile in the Fund. State tax revenues are suffering from the lagged effect of last year's recession. For the last four calendar quarters, states have shown lower receipts versus the comparable quarter a year ago. Emphasis on local municipal paper where tax receipts are primarily property tax based should provide more stable quality within the Fund. We will not succumb to temptation to lower our quality standards or extend portfolio duration to capture lost yield.

•Marshall Intermediate Tax-Free Fund

* Past performance is no guarantee of future results. The line graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The L7GO and the LIMI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The L7GO is an index comprised of general obligation bonds rated A or better with maturities between six and eight years. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

Annual Report -- Commentary

Richard M. Rokus, CFA

Marshall Short-Term Income Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 3.77%.* In comparison, the Lipper Short-Term Investment Grade Bond Fund Index (LSTIBI) returned 3.69%, while the Merrill Lynch 1-3 Year U.S. Government/Corporate Index (ML13) returned 6.48%.**

Factors Affecting Performance

Because the Fund invests primarily in fixed income securities with maturities ranging from three months to two years, it has benefited from a decline in short-term interest rates during the fiscal year. During that time period, the Federal Reserve Board (the "Fed") cut the federal funds target rate, the amount charged to member banks for overnight loans, from 3.5% to 1.75%.

In early 2002, the investment community generally believed that the Fed would have to increase interest rates in response to a strong economic recovery that appeared to be taking place. As a result, the yield on the two-year Treasury note rose to 3.7% in late March. However, the recovery lost steam, and the yield on the two-year note fell to 2.1% by the end of the reporting period.

In the case of Treasury securities, declining interest rates translates into higher bond prices. However, the effect on mortgage-backed securities was not quite as beneficial, since investors became concerned about refinancing, which homeowners were quick to do when rates declined.

Another major trend during the reporting period involved the corporate bond market, which suffered declines due to the weaker-than-expected economy as well as highly publicized accounting scandals. Indeed, the primary reason why the Fund lagged the ML13 is that the index contains no corporate bonds. Corporate bonds are still attractive, primarily because of their higher yields. However, the Fund has increased the diversification of its corporate holdings to reduce the credit risk of an individual holding.

Looking Ahead

Because interest rates are likely to decline further, our strategy is to limit our purchase of mortgage-backed securities. Likewise, because the corporate bond market is in a state of flux due to the weakened economy and questions of management integrity, we are cautious in that sector, carefully focusing on high quality issues. Perhaps the most attractive category is the government agency market, which can continue to benefit from declining interest rates without concerns over credit or refinancing risk.

•Marshall Short-Term Income Fund

* Past performance is no guarantee of future results. The line graph and the table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.

** The ML13 and the LSTIBI are not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in a mutual fund's performance. These indexes are unmanaged. Actual investments may not be made in an index. The ML13 is an index tracking short-term U.S. government and corporate securities with maturities between 1 and 2.99 years. The index is produced by Merrill Lynch Pierce Fenner & Smith. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

Annual Report -- Commentary

Richard M. Rokus, CFA

Marshall Money Market Fund

Fund Performance

For the fiscal year ended August 31, 2002, the Fund provided a total return of 1.99%.* In comparison, the Lipper Money Market Funds Index (LMMFI) returned 1.74%, while iMoneyNet, Inc. Money Fund Report AveragesTM (MFRA) returned 1.67%.** As of August 31, 2002, the Fund's 7-day net yield was 1.50%.***

Factors Affecting Performance

Within weeks after the September 11 terrorist attacks, the Federal Reserve Board (the "Fed") cut the federal funds target rate, the amount charged to member banks for overnight loans, from 3.5% to 1.75% where it has remained through the end of the fiscal year. The Fed's attempt to boost economic growth by lowering rates has had limited success. Although the economy, as measured by the Gross Domestic Product, appeared to emerge from recession in late 2001 and early 2002, there was concern that the Fed's actions were wearing off and that a "double dip" recession could take place.

The Fund's superior total return partly reflects the purchase of high quality one-year securities when interest rates were higher. In addition, the Fund has generally avoided the commercial paper of companies that have received unfavorable news coverage.

Another factor has reduced the appeal of commercial paper: scarcity. With interest rates low, the supply of commercial paper, typically with maturities of 30 to 365 days, has become sparse, as a number of major issuers have elected to issue debt with maturities beyond one year.

Looking Ahead

Because of the weak economy, it is likely that interest rates will remain at low levels for the next several months. At the same time, the Fed would not likely reduce short-term rates since 1.75% is already the lowest level in 40 years. Moreover, the Fed does not want to find itself in the position of the Japanese central bank, in which interest rates were virtually lowered to zero without much influence on economic growth.

Because interest rates are so low, part of the Fund's strategy is to add floating rate securities in which yields reset frequently. Partly because the expectation is that the Fed is likely to stand put, the extra yield offered by 90-day commercial paper over the federal funds target rate is virtually zero. The Fund will add longer-term securities when yields become more attractive. How soon that happens may depend on the long-awaited recovery picking up steam.

* Past performance is no guarantee of future results. Yields may vary. Yields quoted for money market funds most closely reflect the Fund's current earnings.

** Money Fund ReportTM , a service of iMoney Net, Inc. (formerly IBC Financial Data) publishes annualized yields of hundreds of money market funds on a weekly basis, and through its Money Market Insight publication reports monthly and year-to-date investment results for the same money funds. Lipper indexes are an average of the total return of the 30 largest mutual funds designated by Lipper, Inc. as falling into the respective categories indicated.

*** The 7-day net annualized yield is based on the average net income per share for the 7 days ended on the date of calculation and the offering price on that date. The 7-day effective yield is annualized and reflects daily compounding of the 7-day net yield.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Equity Income Fund

 

Description

 

   

Shares

   

 

Value

Common Stocks -- 95.8%

 

 

 

 

 

 

Consumer Discretionary -- 4.1%

 

 

 

 

 

 

Advertising -- 0.4%

 

 

 

 

 

 

 

Interpublic Group of Cos., Inc.

 

 

65,000

 

$

1,184,950

 

Auto Parts & Equipment -- 0.4%

 

 

 

 

 

 

Delphi Corp.

 

 

94,200

 

 

918,450

 

Johnson Controls, Inc.

 

 

7,100

 

 

612,659

 

 

 

 

 

 

 

1,531,109

 

Automobile Manufacturers -- 0.9%

 

 

 

 

Ford Motor Co.

 

 

65,554

 

 

771,571

 

General Motors Corp.

 

 

47,100

 

 

2,254,206

 

 

 

 

 

 

 

3,025,777

 

Department Stores -- 1.0%

 

 

 

 

 

 

 

May Department Stores Co.

 

 

36,700

 

 

1,076,411

 

Sears, Roebuck & Co.

 

 

52,700

 

 

2,398,377

 

 

 

 

 

 

 

3,474,788

 

Hotels -- 0.5%

 

 

 

 

 

 

 

Carnival Corp.

 

 

64,800

 

 

1,585,656

 

Household Appliances -- 0.5%

 

 

 

 

 

 

 

Maytag Corp.

 

 

53,000

 

 

1,729,920

 

Photographic Products -- 0.2%

 

 

 

 

 

 

 

Eastman Kodak Co.

 

 

23,500

 

 

717,690

 

Publishing -- 0.2%

 

 

 

 

 

 

 

McGraw-Hill Cos., Inc.

 

 

11,000

 

 

697,510

 

Total Consumer Discretionary

 

 

 

 

 

13,947,400

Consumer Staples -- 9.9%

 

 

 

 

 

 

 

Food Distributors -- 0.3%

 

 

 

 

 

 

 

SUPERVALU, Inc.

 

 

44,600

 

 

926,342

 

Household Products -- 4.3%

 

 

 

 

 

 

 

Clorox Co.

 

 

37,500

 

 

1,614,750

 

Kimberly-Clark Corp.

 

 

56,300

 

 

3,368,992

 

Procter & Gamble Co.

 

 

110,600

 

 

9,804,690

 

 

 

 

 

 

 

14,788,432

 

Packaged Foods -- 1.8%

 

 

 

 

 

 

 

Campbell Soup Co.

 

 

65,400

 

 

1,514,010

 

General Mills, Inc.

 

 

17,700

 

 

744,993

 

Heinz (H.J.) Co.

 

 

50,600

 

 

1,911,162

 

Sara Lee Corp.

 

 

112,000

 

 

2,065,280

 

 

 

 

 

 

 

6,235,445

 

Personal Products -- 0.6%

 

 

 

 

 

 

 

Gillette Co.

 

 

63,800

 

 

2,011,614

 

Retail-Foods -- 0.3%

 

 

 

 

 

 

 

Albertson's, Inc.

 

 

37,500

 

 

964,500

 

Tobacco -- 2.6%

 

 

 

 

 

 

 

Philip Morris Cos., Inc.

 

 

179,500

 

 

8,975,000

 

Total Consumer Staples

 

 

 

 

 

33,901,333

Energy -- 9.1%

 

 

 

 

 

 

 

Oil & Gas Equipment/
Services -- 0.5%

 

 

Schlumberger Ltd.

 

 

36,800

 

 

1,590,128

 

Oil & Gas Exploration/
Production -- 0.1%

 

Conoco, Inc.

 

 

20,300

 

 

498,365

 

Oil & Gas Integrated -- 7.8%

 

 

 

 

 

 

 

ChevronTexaco Corp.

 

 

85,934

 

 

6,585,122

 

Exxon Mobil Corp.

 

 

446,152

 

 

15,816,088

 

(1)Occidental Petroleum Corp.

 

 

62,100

 

 

1,844,370

 

Phillips Petroleum Co.

 

 

45,600

 

 

2,397,648

 

 

 

 

 

 

 

26,643,228

 

Refining/Marketing -- 0.7%

 

 

 

 

 

 

 

Ashland, Inc.

 

 

38,000

 

 

1,089,080

 

Sunoco, Inc.

 

 

39,500

 

 

1,401,460

 

 

 

 

 

 

 

2,490,540

 

Total Energy

 

 

 

 

 

31,222,261

Financials -- 26.9%

 

 

 

 

 

 

 

Banks -- 13.5%

 

 

 

 

 

 

 

Bank of America Corp.

 

 

128,600

 

 

9,012,288

 

Bank of New York Co., Inc.

 

 

78,800

 

 

2,769,820

 

Bank One Corp.

 

 

77,400

 

 

3,169,530

 

BB&T Corp.

 

 

24,300

 

 

924,615

 

Comerica, Inc.

 

 

26,300

 

 

1,538,550

 

Fleet Boston Financial Corp.

 

 

95,820

 

 

2,312,137

 

Mellon Financial Corp.

 

 

49,100

 

 

1,357,615

 

National City Corp.

 

 

74,900

 

 

2,334,633

 

PNC Financial Services Group, Inc.

 

 

40,000

 

 

1,843,600

 

Regions Financial Corp.

 

 

31,400

 

 

1,121,608

 

SouthTrust Corp.

 

 

27,300

 

 

716,352

 

SunTrust Banks, Inc.

 

 

34,000

 

 

2,295,340

 

Synovus Financial Corp.

 

 

43,300

 

 

1,046,561

 

U.S. Bancorp

 

 

123,500

 

 

2,654,015

 

Wachovia Corp.

 

 

80,800

 

 

2,977,480

 

Washington Mutual, Inc.

 

 

86,300

 

 

3,263,003

 

Wells Fargo & Co.

 

 

132,700

 

 

6,925,613

 

 

 

 

 

 

 

46,262,760

 

Consumer Finance -- 0.3%

 

 

 

 

 

 

 

Household International, Inc.

 

 

27,800

 

 

1,003,858

 

Diversified Financial
Services -- 9.0%

 

Citigroup, Inc.

 

 

416,238

 

 

13,631,795

 

Fannie Mae

 

 

76,000

 

 

5,759,280

 

J.P. Morgan & Co., Inc.

 

 

160,150

 

 

4,227,960

 

Merrill Lynch & Co., Inc.

 

 

80,700

 

 

2,922,954

 

Morgan Stanley Dean Witter & Co.

 

 

102,800

 

 

4,391,616

 

 

 

 

 

 

 

30,933,605

 

Insurance-Brokers -- 1.0%

 

 

 

 

 

 

 

AON Corp.

 

 

24,800

 

 

490,048

 

Marsh & McLennan Cos., Inc.

 

 

60,800

 

 

2,957,920

 

 

 

 

 

 

 

3,447,968

 

Insurance-Life/Health -- 1.2%

 

 

 

 

 

 

 

Jefferson-Pilot Corp.

 

 

16,200

 

 

682,344

 

Lincoln National Corp.

 

 

50,600

 

 

1,874,730

 

UNUM Provident Corp.

 

 

60,500

 

 

1,401,180

 

 

 

 

 

 

 

3,958,254

 

Insurance-Multi-line -- 0.3%

 

 

 

 

 

 

 

Hartford Financial Services Group, Inc.

 

 

17,600

 

 

880,352

 

Insurance-Property/Casualty -- 0.9%

 

 

 

 

Ace, Ltd.

 

 

32,400

 

 

1,030,644

 

Allstate Corp.

 

 

57,800

 

 

2,151,316

 

 

 

 

 

 

 

3,181,960

 

Real Estate Investment Trust -- 0.7%

 

Equity Office Properties Trust

 

 

88,500

 

 

2,467,380

 

Total Financials

 

 

 

 

 

92,136,137

Healthcare -- 17.5%

 

 

 

 

 

 

 

Pharmaceuticals -- 17.5%

 

 

 

 

 

 

 

Abbott Laboratories

 

 

97,450

 

 

3,900,923

 

Bristol-Myers Squibb Co.

 

 

262,600

 

 

6,551,870

 

Johnson & Johnson

 

 

175,700

 

 

9,542,267

 

Lilly (Eli) & Co.

 

 

99,150

 

 

5,755,657

 

Merck & Co., Inc.

 

 

197,200

 

 

9,962,544

 

Pfizer, Inc.

 

 

383,900

 

 

12,699,412

 

Pharmacia Corp.

 

 

88,400

 

 

3,863,080

 

Schering Plough Corp.

 

 

135,700

 

 

3,131,956

 

Wyeth

 

 

107,700

 

 

4,609,560

 

Total Healthcare

 

 

 

 

 

60,017,269

Industrials -- 12.6%

 

 

 

 

 

 

 

Aerospace/Defense -- 2.5%

 

 

 

 

 

 

 

Boeing Co.

 

 

74,400

 

 

2,758,008

 

Goodrich Corp.

 

 

48,300

 

 

1,008,021

 

Honeywell International, Inc.

 

 

79,200

 

 

2,372,040

 

United Technologies Corp.

 

 

40,600

 

 

2,411,234

 

 

 

 

 

 

 

8,549,303

 

Air Freight & Logistics -- 0.2%

 

 

 

 

 

 

 

Ryder Systems, Inc.

 

 

28,400

 

 

742,376

 

Commercial Printing -- 0.3%

 

 

 

 

 

 

 

Donnelley (R.R.) & Sons Co.

 

 

34,500

 

 

910,110

 

Construction & Engineering
Services -- 0.3%

 

Fluor Corp.

 

 

38,500

 

 

1,064,910

 

Electrical Components -- 1.3%

 

 

 

 

 

 

 

(1)Cooper Industries, Inc.

 

 

32,900

 

 

1,076,488

 

Emerson Electric Co.

 

 

51,100

 

 

2,492,658

 

Rockwell Automation, Inc.

 

 

40,500

 

 

746,010

 

 

 

 

 

 

 

4,315,156

 

Industrial Conglomerates -- 6.3%

 

 

 

 

 

 

(1)3M Co.

 

 

28,400

 

 

3,548,580

 

General Electric Co.

 

 

597,000

 

 

17,999,550

 

 

 

 

 

 

 

21,548,130

 

Machinery Construction/
Farm -- 0.2%

 

 

 

 

Caterpillar, Inc.

 

 

13,200

 

 

576,048

 

Machinery Industrial -- 0.7%

 

 

 

 

 

 

 

Dover Corp.

 

 

28,500

 

 

818,805

 

Eaton Corp.

 

 

15,200

 

 

1,075,248

 

Ingersoll-Rand Co.

 

 

17,700

 

 

664,635

 

 

 

 

 

 

 

2,558,688

 

Railroads -- 0.3%

 

 

 

 

 

 

 

Burlington Northern Santa Fe

 

 

40,300

 

 

1,159,028

 

Services-Office/Supplies -- 0.5%

 

 

 

 

 

Avery Dennison Corp.

 

 

18,900

 

 

1,192,968

 

Pitney Bowes, Inc.

 

 

18,500

 

 

670,625

 

 

 

 

 

 

 

1,863,593

 

Total Industrials

 

 

 

 

 

43,287,342

Information Technology -- 1.0%

 

 

 

 

 

 

 

Computer Hardware -- 1.0%

 

 

 

 

 

 

 

(1)Hewlett-Packard Co.

 

 

242,400

 

 

3,255,432

Materials -- 4.0%

 

 

 

 

 

 

 

Aluminum -- 0.6%

 

 

 

 

 

 

 

Alcoa, Inc.

 

 

89,100

 

 

2,235,519

 

Chemicals Diversified -- 1.9%

 

 

 

 

 

 

 

Dow Chemical Co.

 

 

83,608

 

 

2,526,634

 

Du Pont (E.I.) de Nemours & Co.

 

 

95,700

 

 

3,857,667

 

 

 

 

 

 

 

6,384,301

 

Construction Materials -- 0.2%

 

 

 

 

 

 

 

Vulcan Materials Co.

 

 

20,800

 

 

811,616

 

Description

 

   

Shares or
Principal
Amount

   

 

Value

 

Industrial Gases -- 0.5%

 

 

 

 

 

 

 

Air Products & Chemicals, Inc.

 

 

34,400

 

$

1,613,704

 

Paper Products -- 0.8%

 

 

 

 

 

 

 

Georgia-Pacific Corp.

 

 

29,900

 

 

629,395

 

International Paper Co.

 

 

28,900

 

 

1,088,085

 

(1)MeadWestvaco Corp.

 

 

44,000

 

 

1,024,760

 

 

 

 

 

 

 

2,742,240

 

Total Materials

 

 

 

 

 

13,787,380

Telecommunications Services -- 6.5%

 

 

 

 

Integrated Telecommunication Services -- 6.5%

 

AT&T Corp.

 

 

245,000

 

 

2,993,900

 

BellSouth Corp.

 

 

138,300

 

 

3,225,156

 

SBC Communications, Inc.

 

 

314,332

 

 

7,776,574

 

Verizon Communications, Inc.

 

 

269,590

 

 

8,357,290

 

Total Telecommunications Services

 

 

 

 

 

22,352,920

Utilities -- 4.2%

 

 

 

 

 

 

 

Electric Utilities -- 2.7%

 

 

 

 

 

 

 

(1)Allegheny Energy, Inc.

 

 

53,200

 

 

1,098,580

 

American Electric Power Co., Inc.

 

 

19,200

 

 

654,720

 

Cinergy Corp.

 

 

28,400

 

 

976,960

 

FPL Group, Inc.

 

 

28,400

 

 

1,621,072

 

FirstEnergy Corp.

 

 

51,100

 

 

1,686,300

 

Pinnacle West Capital Corp.

 

 

33,400

 

 

1,115,894

 

Reliant Energy, Inc.

 

 

69,000

 

 

817,650

 

TECO Energy, Inc.

 

 

61,400

 

 

1,212,650

 

 

 

 

 

 

 

9,183,826

 

Gas Utilities -- 0.7%

 

 

 

 

 

 

 

El Paso Corp.

 

 

55,000

 

 

930,050

 

(1)KeySpan Corp.

 

 

42,500

 

 

1,489,200

 

 

 

 

 

 

 

2,419,250

 

Multi-Utilities -- 0.8%

 

 

 

 

 

 

 

Duke Energy Corp.

 

 

104,300

 

 

2,798,369

 

Total Utilities

 

 

 

 

 

14,401,445

Total Common Stocks
(identified cost $310,142,071)

 

 

 

 

 

328,308,919

(2)U.S. Treasury -- 0.2%

 

 

 

 

 

 

 

10/10/2002 (identified cost $598,914)

 

 

600,000

 

 

598,988

Total Investments in Securities (identified cost $310,740,985)

 

 

 

 

 

328,907,907

Mutual Funds -- 1.6%

 

 

 

 

 

 

 

(1)iShares Russell 1000 Value Index Fund

 

 

68,000

 

 

3,250,400

 

(1)Utilities Select Sector SPDR Fund

 

 

98,200

 

 

2,111,300

Total Mutual Funds (identified cost $5,303,818)

 

 

 

 

 

5,361,700

(3)Repurchase Agreement -- 2.4%

 

 

 

 

 

 

Lehman Brothers, Inc., 1.80%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

8,431,477

 

 

8,431,477

Total Investments (identified cost $324,476,280)

 

 

 

 

$

342,701,084

Large-Cap Growth & Income Fund

 

Description

  

   

Shares

   

 

Value

Common Stocks -- 97.9%

 

 

 

 

 

 

 

Consumer Discretionary -- 13.5%

 

 

 

 

Department Stores -- 2.6%

 

 

 

 

 

 

 

(1)(4)Kohl's Corp.

 

 

102,500

 

$

7,146,300

 

General Merchandise -- 2.5%

 

 

 

 

 

 

Wal-Mart Stores, Inc.

 

 

131,430

 

 

7,028,876

 

Movies & Entertainment -- 3.3%

 

 

 

 

(4)AOL Time Warner, Inc.

 

 

261,350

 

 

3,306,078

 

Disney (Walt) Co.

 

 

147,716

 

 

2,316,187

 

(4)Viacom, Inc., Class B

 

 

92,300

 

 

3,756,610

 

 

 

 

 

 

 

9,378,875

 

Restaurants -- 1.3%

 

 

 

 

 

 

 

McDonald's Corp.

 

 

153,800

 

 

3,654,288

 

Retail-Computer &
Electronics -- 0.8%

 

 

 

 

(1)RadioShack Corp.

 

 

10,500

 

 

2,233,475

 

Retail-Home Improvement -- 3.0%

 

 

 

 

Home Depot, Inc.

 

 

134,940

 

 

4,443,574

 

(1)Lowe's Cos., Inc.

 

 

96,200

 

 

3,980,756

 

 

 

 

 

 

 

8,424,330

 

Total Consumer Discretionary

 

 

 

 

 

37,866,144

Consumer Staples -- 9.2%

 

 

 

 

 

 

 

Household Products -- 1.2%

 

 

 

 

The Procter & Gamble Co.

 

 

39,430

 

 

3,495,469

 

Personal Products -- 2.2%

 

 

 

 

 

 

 

(1)The Estee Lauder Cos., Inc., Class A

 

 

204,220

 

 

6,116,389

 

Retail-Drugs -- 1.3%

 

 

 

 

 

 

 

CVS Corp.

 

 

125,000

 

$

3,673,750

 

Soft Drinks -- 2.7%

 

 

 

 

 

 

 

Coca-Cola Co.

 

 

148,414

 

 

7,569,114

 

Tobacco -- 1.8%

 

 

 

 

 

 

 

Philip Morris Cos., Inc.

 

 

99,500

 

 

4,975,000

 

Total Consumer Staples

 

 

 

 

 

25,829,722

Energy -- 7.2%

 

 

 

 

 

 

 

Oil & Gas-Drilling -- 0.9%

 

 

 

 

 

 

 

(1)Transocean, Inc.

 

 

102,500

 

 

2,511,250

 

Oil & Gas Exploration &
Production -- 0.8%

 

Anadarko Petroleum Corp.

 

 

51,300

 

 

2,290,032

 

Oil & Gas-Integrated -- 5.5%

 

 

 

 

 

 

ChevronTexaco Corp.

 

 

68,425

 

 

5,243,408

 

Exxon Mobil Corp.

 

 

285,542

 

 

10,122,464

 

 

 

 

 

 

 

15,365,872

 

Total Energy

 

 

 

 

 

20,167,154

Financials -- 21.1%

 

 

 

 

 

 

 

Banks -- 6.7%

 

 

 

 

 

 

 

Bank of America Corp.

 

 

102,500

 

 

7,183,200

 

Bank of New York Co., Inc.

 

 

119,640

 

 

4,205,346

 

Wells Fargo & Co.

 

 

142,080

 

 

7,415,155

 

 

 

 

 

 

 

18,803,701

 

Diversified Financial Services -- 9.6%

 

American Express Co.

 

 

152,460

 

 

5,497,708

 

Citigroup, Inc.

 

 

156,623

 

 

5,129,403

 

Federal Home Loan Mortgage Corp.

 

 

93,290

 

 

5,979,889

 

(1)Goldman Sachs Group, Inc.

 

 

76,900

 

 

5,944,370

 

Morgan Stanley

 

 

102,500

 

 

4,378,800

 

 

 

 

 

 

 

26,930,170

 

Insurance-Multi-Line -- 1.0%

 

 

 

 

 

 

American International Group, Inc.

 

 

42,024

 

 

2,639,107

 

Insurance-Property- Casualty -- 3.8%

 

Chubb Corp.

 

 

75,000

 

 

4,641,750

 

(1)MGIC Investment Corp.

 

 

89,520

 

 

5,389,999

 

(4)Travelers Property
Casualty Corp., Class A

 

 

26,766

 

 

420,761

 

(4)Travelers Property
Casualty Corp., Class B

 

 

13,902

 

 

226,464

 

 

 

 

 

 

 

10,678,974

 

Total Financials

 

 

 

 

 

59,051952

Healthcare -- 16.9%

 

 

 

 

 

 

 

Healthcare-Distribution
Services -- 1.4%

 

 

(1)Cardinal Health, Inc.

 

 

58,250

 

 

3,776,930

 

Healthcare-Equipment -- 1.0%

 

 

 

 

 

Guidant Corp.

 

 

75,000

 

 

2,760,000

 

Healthcare-Facility -- 4.2%

 

 

 

 

 

 

 

HCA, Inc.

 

 

254,800

 

 

11,860,940

 

Healthcare-Supplies -- 0.3%

 

 

 

 

 

 

 

(4)Alcon, Inc.

 

 

22,600

 

 

835,522

 

Pharmaceuticals -- 10.0%

 

 

 

 

 

 

 

Abbott Laboratories

 

 

47,300

 

 

1,893,419

 

Johnson & Johnson

 

 

43,870

 

 

2,382,580

 

Merck & Co., Inc.

 

 

52,670

 

 

2,660,888

 

(1)Pfizer, Inc.

 

 

241,010

 

 

7,972,611

 

Pharmacia Corp.

 

 

148,470

 

 

6,488,139

 

Schering Plough Corp.

 

 

107,620

 

 

2,483,870

 

Wyeth

 

 

98,740

 

 

4,226,072

 

 

 

 

 

 

 

28,107,579

 

Total Healthcare

 

 

 

 

 

47,340,71

Industrials -- 11.6%

 

 

 

 

 

 

 

Aerospace & Defense -- 3.0%

 

 

 

 

 

 

Boeing Co.

 

 

102,500

 

 

3,799,675

 

Honeywell International, Inc.

 

 

156,410

 

 

4,684,479

 

 

 

 

 

 

 

8,484,154

 

Industrial Conglomerates -- 6.7%

 

 

 

 

(1)(4)3M Co.

 

 

47,900

 

 

5,985,105

 

General Electric Co.

 

 

427,640

 

 

12,893,346

 

 

 

 

 

 

 

18,878,451

 

Machinery Industrial -- 1.9%

 

 

 

 

 

 

Parker-Hannifin Corp.

 

 

128,100

 

 

5,195,736

 

Total Industrials

 

 

 

 

 

32,558,341

Information Technology -- 13.5%

 

 

 

 

 

 

Computer Hardware -- 1.0%

 

 

 

 

 

 

International Business Machines Corp.

 

 

35,940

 

 

2,709,157

 

Computer Storage & Peripheral -- 0.8%

 

 

(4)Lexmark International Inc., Class A

 

 

44,380

 

 

2,094,736

 

Electrical Equipment & Instrument -- 0.8%

 

(4)Flextronics International Ltd.

 

 

250,000

 

 

2,367,500

 

Networking Equipment -- 0.7%

 

 

 

 

(4)Cisco Systems, Inc.

 

 

150,000

 

 

2,073,000

 

Description

 

 

Shares or
Principal
Amount

 

 

Value

 

Semiconductors -- 3.6%

 

 

 

 

 

 

 

Intel Corp.

 

 

245,100

 

$

4,085,817

 

Micron Technology, Inc.

 

 

137,780

 

 

2,376,705

 

Texas Instruments, Inc.

 

 

182,870

 

 

3,602,539

 

 

 

 

 

 

 

10,065,061

 

Semiconductor Equipment -- 0.9%

 

 

(4)Applied Materials, Inc.

 

 

197,200

 

 

2,634,592
  Systems Software -- 5.7%            

 

(4)BMC Software, Inc.

 

 

165,950

 

 

2,306,705

 

(4)Microsoft Corp.

 

 

266,870

 

 

13,097,980

 

(4)Veritas Software Corp.

 

 

33,040

 

 

534,918

 

 

 

 

 

 

 

15,939,603

 

Total Information Technology

 

 

 

 

 

37,883,649

Materials -- 3.4%

 

 

 

 

 

 

 

Aluminum -- 1.4%

 

 

 

 

 

 

 

Alcoa, Inc.

 

 

153,800

 

 

3,858,842

 

Forest Products -- 2.0%

 

 

 

 

 

 

 

Weyerhaeuser Co.

 

 

102,500

 

 

5,587,275

 

Total Materials

 

 

 

 

 

9,446,117

Telecommunication Services -- 1.5%

 

 

 

 

Integrated Telecommunication
Services -- 1.5%

 

SBC Communications, Inc.

 

 

163,240

 

 

4,038,558

Total Common Stocks (identified cost $246,804,728)

 

 

 

 

 

274,182,608

(3)Repurchase Agreement -- 2.2%

 

 

 

 

 

 

Lehman Brothers, Inc., 1.80%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

6,010,102

 

 

6,010,102

Total Investments (identified cost $252,814,830)

 

 

 

 

$

280,192,710

Mid-Cap Value Fund

 

Description

   

   

Shares

   

 

Value

Common Stocks -- 97.2%

 

 

 

 

 

 

Consumer Discretionary -- 5.7%

 

 

 

 

 

 

Auto Parts & Equipment -- 1.1%

 

 

 

 

(1)Johnson Controls, Inc.

 

 

25,000

 

$

2,157,250

 

Housewares & Specialties -- 1.6%

 

 

 

 

Newell Rubbermaid, Inc.

 

 

95,000

 

 

3,287,000

 

Leisure Products -- 2.1%

 

 

 

 

 

 

 

(1)Mattel, Inc.

 

 

215,000

 

$

4,177,450

 

Retail-Apparel -- 0.9%

 

 

 

 

 

 

 

Ross Stores, Inc.

 

 

50,000

 

 

1,805,500

 

Total Consumer Discretionary

 

 

 

 

 

11,427,200

Consumer Staples -- 6.8%

 

 

 

 

 

 

 

Food Distributors -- 1.5%

 

 

 

 

 

 

 

SUPERVALU, Inc.

 

 

145,000

 

 

3,011,650

 

Packaged Food & Meats -- 1.0%

 

 

 

 

(4)Ralcorp Holdings, Inc.

 

 

85,000

 

 

2,016,200

 

Retail-Drugs -- 2.3%

 

 

 

 

 

 

 

CVS Corp.

 

 

155,000

 

 

4,555,450

 

Retail-Food -- 2.0 %

 

 

 

 

 

 

 

(4)Kroger Co., Inc.

 

 

225,000

 

 

4,068,000

 

Total Consumer Staples

 

 

 

 

 

13,651,300

Energy -- 5.7%

 

 

 

 

 

 

 

Oil & Gas Drilling -- 1.5%

 

 

 

 

 

 

 

(4)Noble Corp.

 

 

95,000

 

 

2,951,650

 

Oil & Gas Exploration &
Products -- 4.2%

 

Burlington Resources, Inc.

 

 

125,000

 

 

4,808,750

 

Noble Energy, Inc.

 

 

112,200

 

 

3,741,870

 

 

 

 

 

 

 

8,550,620

 

Total Energy

 

 

 

 

 

11,502,270

Financials -- 13.4%

 

 

 

 

 

 

 

Banks -- 1.3%

 

 

 

 

 

 

 

Associated Banc Corp.

 

 

74,650

 

 

2,598,566

 

Consumer Finance -- 2.3%

 

 

 

 

 

 

 

(1)Countrywide Credit Industries, Inc.

 

 

90,000

 

 

4,724,100

 

Diversified Financial
Services -- 1.4%

 

(1)(4)CIT Group, Inc.

 

 

130,000

 

 

2,827,500

 

Insurance-Life & Health -- 1.1%

 

 

 

 

Jefferson-Pilot Corp.

 

 

50,000

 

 

2,106,000

 

Insurance-Property &
Casualty -- 5.7%

 

(1)ACE Ltd.

 

 

70,000

 

 

2,226,700

 

MGIC Investment Corp.

 

 

61,000

 

 

3,672,810

 

(1)SAFECO Corp.

 

 

165,000

 

 

5,463,150

 

 

 

 

 

 

 

11,362,660

 

Reinsurance -- 1.6%

 

 

 

 

 

 

 

PartnerRe Ltd.

 

 

73,400

 

$

3,300,064

 

Total Financials

 

 

 

 

 

26,918,890

Healthcare -- 11.2%

 

 

 

 

 

 

 

Biotechnology -- 0.9%

 

 

 

 

 

 

 

(4)Invitrogen Corp.

 

 

50,000

 

 

1,780,000

 

Healthcare-Distribution
Services -- 2.1%

 

(1)(4)Renal Care Group, Inc.

 

 

130,000

 

 

4,267,900

 

Healthcare-Equipment -- 3.1%

 

 

 

 

(4)Boston Scientific Corp.

 

 

70,000

 

 

2,040,500

 

Guidant Corp.

 

 

115,000

 

 

4,232,000

 

 

 

 

 

 

 

6,272,500

 

Healthcare-Facility -- 2.8%

 

 

 

 

 

 

 

(4)Manor Care, Inc.

 

 

235,200

 

 

5,513,088

 

Healthcare-Supplies -- 2.3%

 

 

 

 

 

Bausch & Lomb, Inc.

 

 

145,000

 

 

4,566,050

 

Total Healthcare

 

 

 

 

 

22,399,538

Industrials -- 22.7%

 

 

 

 

 

 

 

Aerospace & Defense -- 1.5%

 

 

 

 

 

 

(1)Northrop Grumman Corp.

 

 

25,000

 

 

3,070,000

 

Commercial Printing -- 0.2%

 

 

 

 

 

 

Donnelley (R.R.) & Sons Co.

 

 

18,600

 

 

490,668

 

Construction & Engineering -- 0.7%

 

 

Fluor Corp.

 

 

50,000

 

 

1,383,000

 

Electrical Components -- 1.9%

 

 

 

 

Rockwell Automation, Inc.

 

 

203,300

 

 

3,744,786

 

Electrical Equipment -- 2.2%

 

 

 

 

 

Hubbell, Inc., Class B

 

 

140,000

 

 

4,494,000

 

Machinery Industrial -- 2.2%

 

 

 

 

 

SPX Corp.

 

 

40,000

 

 

4,344,000

 

Rail Roads -- 2.4%

 

 

 

 

 

 

 

CSX Corp.

 

 

135,000

 

 

4,702,050

 

Services-Data Processing -- 1.2%

 

 

 

 

(1)(4)Global Payments, Inc.

 

 

87,200

 

 

2,429,392

 

Services-Diversified
Commercials -- 3.9%

 

(1)H&R Block, Inc.

 

 

25,000

 

 

1,222,500

 

Viad Corp.

 

 

160,000

 

 

3,540,800

 

(1)(4)Watson Wyatt & Company Holdings

 

 

150,000

 

$

3,084,000

 

 

 

 

 

 

 

7,847,300

 

Services-Employment -- 1.8%

 

 

 

 

 

Manpower, Inc.

 

 

110,000

 

 

3,643,200

 

Services-Environmental -- 2.3%

 

 

 

 

(4)Republic Services, Inc.

 

 

220,000

 

 

4,532,000

 

Trucking -- 2.4%

 

 

 

 

 

 

 

(4)Landstar System, Inc.

 

 

50,000

 

 

2,532,500

 

(4)Swift Transportation Co., Inc.

 

 

125,000

 

 

2,198,750

 

 

 

 

 

 

 

4,731,250

 

Total Industrials

 

 

 

 

 

45,411,646

Information Technology -- 11.6%

 

 

 

 

 

 

Computer Storage &
Peripheral -- 1.7%

 

(4)Electronics for Imaging, Inc.

 

 

230,000

 

 

3,456,900

 

Electrical Equipment &
Instruments -- 0.6%

 

(1) (4)Celestica, Inc.

 

 

50,000

 

 

1,148,500

 

IT Consulting & Services -- 4.4%

 

 

 

 

(4)American Management
System, Inc.

 

 

235,000

 

 

3,525,000

 

(4)Computer Sciences Corp.

 

 

68,000

 

 

2,504,440

 

(4)Keane, Inc.

 

 

330,000

 

 

2,673,000

 

 

 

 

 

 

 

8,702,440

 

Office Electronics -- 2.2%

 

 

 

 

 

 

 

(1)IKON Office Solutions, Inc.

 

 

485,000

 

 

4,486,250

 

Semiconductors
Equipment -- 0.5%

 

 

 

 

(4)Teradyne, Inc.

 

 

75,000

 

 

948,750

 

Systems Software -- 1.6%

 

 

 

 

 

 

 

(4)BMC Software, Inc.

 

 

235,000

 

 

3,266,500

 

Telecommunications
Equipment -- 0.6%

 

 

(4)CommScope, Inc.

 

 

180,000

 

 

1,216,800

 

Total Information Technology

 

 

 

 

 

23,226,140

Materials -- 11.6%

 

 

 

 

 

 

 

Construction Materials -- 1.5%

 

 

 

 

Martin Marietta Materials, Inc.

 

 

81,000

 

 

2,967,840

 

Description

   

 

Shares or
Principal
Amount

   

 

Value

 

Chemicals & Specialty -- 1.6%

 

(1)H.B. Fuller Co.

 

 

120,000

 

$

3,234,000

 

Diversified Metal & Mining -- 3.5%

 

Arch Coal, Inc.

 

 

207,800

 

 

3,802,740

 

(1)Fording, Inc.

 

 

216,900

 

 

3,257,838

 

 

 

 

 

 

 

7,060,578

 

Steel -- 1.8%

 

 

 

 

 

 

 

Nucor Corp.

 

 

70,000

 

 

3,502,800

 

Paper Products -- 1.8%

 

 

 

 

 

 

 

Bowater, Inc.

 

 

90,000

 

 

3,679,200

 

Paper Packaging -- 1.4%

 

 

 

 

 

 

 

(1)(4)Packaging Corp. of America

 

 

145,200

 

 

2,734,116

 

Total Materials

 

 

 

 

 

23,178,534

Telecommunication Services -- 3.3%

 

 

 

 

Integrated Telecommunication
Services -- 3.3%

 

ALLTEL Corp.

 

 

97,600

 

 

4,105,056

 

(1)Citizens Communications Co., Class B

 

35,000

 

 

2,562,000

 

Total Telecommunication Services

 

 

 

 

 

6,667,056

Utilities -- 5.2%

 

 

 

 

 

 

 

Electric Utilities -- 5.2%

 

 

 

 

 

 

 

ALLETE, Inc.

 

 

60,000

 

 

1,494,000

 

Cinergy Corp.

 

 

100,000

 

 

3,440,000

 

(1)TECO Energy, Inc.

 

 

190,000

 

 

3,752,500

 

(1)Xcel Energy, Inc.

 

 

170,000

 

 

1,642,200

 

Total Utilities

 

 

 

 

 

10,328,700

Total Common Stocks (identified cost $184,228,844)

 

 

 

 

 

194,711,274

(3)Repurchase Agreement -- 2.6%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

5,139,030

 

 

5,139,030

Total Investments (identified cost $189,367,874)

 

 

 

 

$

199,850,304

Mid-Cap Growth Fund

 

Description

   

   

Shares

   

 

Value

Common Stocks -- 92.1%

 

 

 

 

 

 

Consumer Discretionary -- 20.0%

 

 

 

 

 

Broadcasting & Cable -- 7.0%

 

 

 

 

 

 

(4)Cox Radio, Inc., Class A

 

 

185,000

 

$

4,436,300

 

(1)(4)Mediacom Communications Corp.

 

 

500,000

 

 

2,950,000

 

(4)Liberty Media Corp., Class A

 

 

350,000

 

 

2,926,000

 

(1)(4)Radio One, Inc., Class D

 

 

265,000

 

 

4,168,450

 

 

 

 

 

 

 

14,480,750

 

Department Stores -- 3.5%

 

 

 

 

 

 

 

(1)(4)Stage Stores, Inc.

 

 

336,200

 

 

7,282,092

 

Leisure Facilities -- 1.7%

 

 

 

 

 

 

 

(1)(4)Six Flags, Inc.

 

 

675,000

 

 

3,422,250

 

Leisure Products -- 3.6%

 

 

 

 

 

 

 

Brunswick Corp.

 

 

300,000

 

 

7,335,000

 

Specialty Stores -- 4.2%

 

 

 

 

 

 

 

(4)Advance Auto Parts, Inc.

 

 

65,000

 

 

3,396,250

 

(4)Copart, Inc.

 

 

200,000

 

 

2,814,000

 

(4)Staples, Inc.

 

 

175,000

 

 

2,432,500

 

 

 

 

 

 

 

8,642,750

 

Total Consumer Discretionary

 

 

 

 

 

41,162,842

Consumer Staples -- 2.5%

 

 

 

 

 

 

 

Food Distributors -- 2.5%

 

 

 

 

 

 

 

(1)(4)Performance Food Group Co.

 

 

150,000

 

 

5,197,500

Energy -- 8.9%

 

 

 

 

 

 

 

Oil & Gas Drilling -- 4.6%

 

 

 

 

 

 

 

(1)(4)Nabors Industries, Inc.

 

 

90,000

 

 

2,971,800

 

(4)Noble Corp.

 

 

110,000

 

 

3,417,700

 

(1)(4)Pride International, Inc.

 

 

225,000

 

 

3,010,500

 

 

 

 

 

 

 

9,400,000

 

Oil & Gas Exploration & Production -- 4.3%

 

Noble Energy, Inc.

 

 

120,000

 

 

4,002,000

 

(1)Ocean Energy, Inc.

 

 

230,000

 

 

4,820,800

 

 

 

 

 

 

 

8,822,800

 

Total Energy

 

 

 

 

 

18,222,800

Financials -- 10.7%

 

 

 

 

 

 

 

Reinsurance -- 5.8%

 

 

 

 

 

 

 

(1)Everest Re Group Ltd.

 

 

95,000

 

 

5,149,000

 

PartnerRe Ltd.

 

 

150,000

 

 

6,744,000

 

 

 

 

 

 

 

11,893,000

 

Insurance-Life & Health -- 1.1%

 

 

 

 

Lincoln National Corp.

 

 

60,000

 

 

2,223,000

 

Insurance-Property &
Casualty -- 3.8%

 

MGIC Investment Corp.

 

 

70,000

 

 

4,214,700

 

Old Republic International Corp.

 

 

110,000

 

 

3,531,000

 

 

 

 

 

 

 

7,745,700

 

Total Financials

 

 

 

 

 

21,861,700

Healthcare -- 22.2%

 

 

 

 

 

 

 

Biotechnology -- 2.8%

 

 

 

 

 

 

 

(1)(4)BioMarin Pharmaceutical, Inc.

 

 

10,900

 

 

45,126

 

(1)(4)Charles River Laboratories International, Inc.

 

 

90,000

 

 

3,559,500

 

(4)Gilead Sciences, Inc.

 

 

70,000

 

 

2,245,600

 

 

 

 

 

 

 

5,850,226

 

Healthcare-Distribution Services -- 12.0%

 

(1)(4)AdvancePCS

 

 

175,000

 

 

3,388,000

 

(4)AmerisourceBergen Corp.

 

 

100,000

 

 

7,251,000

 

(1)(4)Covance, Inc.

 

 

150,000

 

 

2,928,000

 

(1)(4)Pediatrix Medical Group, Inc.

 

 

100,000

 

 

3,359,000

 

(1)(4)Priority Healthcare Corp., Class B

 

 

175,000

 

 

4,397,750

 

(4)Quest Diagnostic, Inc.

 

 

60,000

 

 

3,363,000

 

 

 

 

 

 

 

24,686,750

 

Healthcare-Managed Care -- 1.5%

 

 

 

 

(1)(4)Caremark Rx, Inc.

 

 

185,000

 

 

2,997,000

 

Healthcare-Facility -- 2.2%

 

 

 

 

 

 

 

(4)Universal Health Services, Inc., Class B

 

 

100,000

 

 

4,572,000

 

Pharmaceuticals -- 3.7%

 

 

 

 

 

 

 

Allergan, Inc.

 

 

25,000

 

 

1,468,000

 

(1)(4)Biovail Corp.

 

 

90,000

 

 

2,415,600

 

(4)King Pharmaceuticals, Inc.

 

 

175,000

 

 

3,729,250

 

 

 

 

 

 

 

7,612,850

 

Total Healthcare

 

 

 

 

 

45,718,826

Industrials -- 9.9%

 

 

 

 

 

 

 

Aerospace & Defense -- 2.0%

 

 

 

 

 

 

(1)(4)InVision Technologies, Inc.

 

 

120,000

 

 

4,095,600

 

Airfreight & Logistics -- 1.3%

 

 

 

 

 

(1)Expeditors International Washington, Inc.

 

 

100,000

 

 

2,635,000

 

Description

 

 

Shares or
Principal
Amount

 

 

Value

 

Machinery Industrial -- 2.6%

 

 

 

 

 

 

(1)SPX Corp.

 

 

50,000

 

$

5,430,000

 

Services-Data Processing -- 3.2%

 

 

 

 

(4)Bisys Group, Inc.

 

 

125,000

 

 

3,185,000

 

(1)(4)Concord EFS, Inc.

 

 

170,000

 

 

3,469,700

 

 

 

 

 

 

 

6,654,700

 

Services-Office Supplies -- 0.8%

 

 

 

 

Herman Miller, Inc.

 

 

100,000

 

 

1,549,000

 

Total Industrials

 

 

 

 

 

20,364,300

Information Technology -- 17.9%

 

 

 

 

Application Software -- 2.0%

 

 

 

 

 

 

(4)Cerner Corp.

 

 

70,000

 

 

2,615,200

 

(4)Intuit, Inc.

 

 

30,000

 

 

1,338,900

 

(4)Vastera, Inc.

 

 

48,700

 

 

116,880

 

 

 

 

 

 

 

4,070,980

 

Internet Software & Services -- 3.2%

 

 

 

 

(4)PEC Solutions, Inc.

 

 

140,000

 

 

3,270,400

 

(1)(4)USA Interactive

 

 

150,000

 

 

3,213,000

 

 

 

 

 

 

 

6,483,400

 

IT Consulting & Services -- 3.2%

 

 

 

 

(1)(4)Affiliated Computer Services, Inc., Class A

 

 

150,000

 

 

6,675,000

 

Semiconductors -- 6.8%

 

 

 

 

 

 

 

(1)(4)Conexant Systems, Inc.

 

 

475,000

 

 

703,000

 

(1)(4)Intersil Corp., Class A

 

 

400,000

 

 

6,768,000

 

(4)Microchip Technology, Inc.

 

 

140,000

 

 

2,947,000

 

(1)(4)Skyworks Solutions, Inc.

 

 

850,000

 

 

3,570,000

 

 

 

 

 

 

 

13,988,000

 

Semiconductors Equipment -- 2.7%

 

 

 

 

(1)(4)ATMI, Inc.

 

 

170,000

 

 

2,895,100

 

(4)Entegris, Inc.

 

 

300,000

 

 

2,709,000

 

 

 

 

 

 

 

5,604,100

 

Total Information Technology

 

 

 

 

 

36,821,480

Total Common Stocks (identified cost $221,033,990)

 

 

 

 

 

189,349,448

U.S. Treasury Bill -- 0.6%

 

 

 

 

 

 

 

10/10/2002 (identified cost $1,247,744)

 

$

1,250,000

 

 

1,247,893

Total Investments in Securities (identified cost $222,281,734)

 

 

 

 

 

190,597,341

 

Description

   

 

Principal
Amount

   

 

Value

(3)Repurchase Agreement -- 7.5%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

15,352,862

 

$

15,352,862

Total Investments (identified cost $237,634,596)

 

 

 

 

$

205,950,203

Small-Cap Growth Fund

 

Description

   

 

Shares

   

 

Value

Common Stocks -- 96.5%

 

 

 

 

 

 

Consumer Discretionary -- 34.1%

 

 

 

 

 

 

Broadcasting -- 3.0%

 

 

 

 

 

 

 

(4)Alliance Atlantis Communications, Inc., Class B

 

150,000

 

$

1,708,500

 

(4)Spanish Broadcasting System, Inc., Class A

 

 

100,000

 

 

707,000

 

 

 

 

 

 

 

2,415,500

 

Casino/Gaming -- 7.3%

 

 

 

 

 

 

 

(4)Ameristar Casinos, Inc.

 

 

140,000

 

 

2,363,200

 

(1)(4)Argosy Gaming Co.

 

 

50,000

 

 

1,400,000

 

Pinnacle Entertainment, Inc.

 

 

250,000

 

 

2,125,000

 

 

 

 

 

 

 

5,888,200

 

Hotel/Resort/Cruise -- 7.0%

 

 

 

 

 

 

 

Intrawest Corp.

 

 

200,000

 

 

3,288,000

 

(1)(4)Orient-Express Hotels Ltd., Class A

 

 

180,000

 

 

2,331,000

 

 

 

 

 

 

 

5,619,000

 

Household Appliances -- 0.4%

 

 

 

 

 

 

 

Helen of Troy Ltd. (4)

 

 

25,000

 

 

299,000

 

Leisure Products -- 7.9%

 

 

 

 

 

 

 

(4)Acclaim Entertainment, Inc.

 

 

155,000

 

 

426,250

 

(1)(4)Activision, Inc.

 

 

45,000

 

 

1,254,150

 

(4)Midway Games, Inc.

 

 

350,000

 

 

2,152,500

 

(1)(4)Take-Two Interactive Software, Inc.

 

 

100,000

 

 

2,510,000

 

 

 

 

 

 

 

6,342,900

 

Retail -- 3.0%

 

 

 

 

 

 

 

(4)The Wet Seal, Inc., Class A

 

 

85,000

 

 

940,100

 

(4)ValueVision Media, Inc.,
Class A

 

 

100,000

 

 

1,423,000

 

 

 

 

 

 

 

2,363,100

 

Retail-Apparel -- 4.1%

 

 

 

 

 

 

 

(4)Abercrombie & Fitch Co.,
Class A

 

 

50,000

 

 

1,140,000

 

(4)American Eagle Outfitters, Inc.

 

 

80,000

 

 

1,176,800

 

(1)(4)Hot Topic, Inc.

 

 

55,000

 

 

957,000

 

 

 

 

 

 

 

3,273,800

 

Retail-Computer/Electrical -- 1.4%

 

 

 

 

(1)(4)Ultimate Electronics, Inc.

 

 

100,000

 

 

1,100,000

 

Total Consumer Discretionary

 

 

 

 

 

27,301,500

Energy -- 11.7%

 

 

 

 

 

 

 

Oil & Gas-Drilling -- 3.0%

 

 

 

 

 

 

 

(4)Patterson-UTI Energy, Inc.

 

 

55,000

 

 

1,373,900

 

(4)Pride International, Inc.

 

 

75,000

 

 

1,003,500

 

 

 

 

 

 

 

2,377,400

 

Oil & Gas-Equipment/
Services -- 5.9%

 

 

 

 

(1)(4)Cal Dive International, Inc.

 

55,000

 

 

1,025,750

 

(4)Horizon Offshore, Inc.

 

 

150,000

 

 

780,000

 

(1)(4)Lone Star Technologies, Inc.

 

 

100,000

 

 

1,517,000

 

(4)National-Oilwell, Inc.

 

 

75,000

 

 

1,419,000

 

 

 

 

 

 

 

4,741,750

 

Oil & Gas-Exploration/ Production -- 2.8%

 

 

 

Noble Energy, Inc.

 

 

40,000

 

 

1,334,000

 

(4)Ultra Petroleum Corp.

 

 

115,000

 

 

920,000

 

 

 

 

 

 

 

2,254,000

 

Total Energy

 

 

 

 

 

9,373,150

Financials -- 10.4%

 

 

 

 

 

 

 

Banks -- 8.6%

 

 

 

 

 

 

 

Astoria Financial Corp.

 

 

50,000

 

 

1,674,000

 

Cullen Frost Bankers, Inc.

 

 

40,000

 

 

1,496,000

 

(4)Indy Mac Bancorp, Inc.

 

 

80,000

 

 

1,824,000

 

(4)Southwest Bancorporation of Texas, Inc.

 

 

50,000

 

 

1,899,000

 

 

 

 

 

 

 

6,893,000

 

Consumer Finance -- 1.1%

 

 

 

 

 

 

 

Doral Financial Corp.

 

 

20,000

 

 

847,800

 

Insurance -- 0.7%

 

 

 

 

 

 

 

(4)Meadowbrook Insurance Group, Inc.

 

 

225,000

 

 

580,500

 

Total Financials

 

 

 

 

 

8,321,300

Healthcare -- 17.4%

 

 

 

 

 

 

 

Biotechnology -- 9.6%

 

 

 

 

 

 

 

(4)Celgene Corp.

 

 

70,000

 

 

1,216,600

 

(1)(4)Cell Genesys, Inc.

 

 

35,000

 

 

404,950

 

(4)Cephalon, Inc.

 

 

40,000

 

 

1,740,000

 

(1)(4)CV Therapeutics, Inc.

 

 

100,000

 

 

2,173,200

 

(1)(4)Charles River Laboratories International, Inc.

 

55,000

 

 

2,175,250

 

 

 

 

 

 

 

7,710,000

 

Healthcare-Distribution/ Services -- 6.3%

 

(1)(4)Covance, Inc.

 

 

85,000

 

 

1,659,200

 

(1)(4)Priority HealthCare Corp., Class B

 

 

135,000

 

 

3,392,550

 

 

 

 

 

 

 

5,051,750

 

Healthcare-Facility -- 1.5%

 

 

 

 

 

 

 

(1)(4)Community Health Systems, Inc.

 

 

50,000

 

 

1,195,000

 

Total Healthcare

 

 

 

 

 

13,956,750

Information Technology -- 22.9%

 

 

 

 

 

 

Application Software -- 4.0%

 

 

 

 

 

 

 

(1)(4)Quest Software, Inc.

 

 

127,600

 

 

1,321,936

 

(4)Rational Software Corp.

 

 

150,000

 

 

1,020,000

 

(4)Verity, Inc.

 

 

80,000

 

 

872,000

 

 

 

 

 

 

 

3,213,936

 

Internet Software -- 0.5%

 

 

 

 

 

 

 

(4)Vignette Corp.

 

 

500,000

 

 

445,000

 

IT Consulting -- 1.3%

 

 

 

 

 

 

 

(4)KPMG Consulting, Inc.

 

 

100,000

 

 

1,015,000

 

Networking Equipment -- 2.1%

 

 

 

 

 

 

(1)(4)Emulex Corp.

 

 

100,000

 

 

1,688,000

 

Semiconductor -- 6.2%

 

 

 

 

 

 

 

(4)Integrated Circuit Systems, Inc.

 

 

70,000

 

 

1,248,100

 

(4)MKS Instruments, Inc.

 

 

90,000

 

 

1,224,900

 

(1)(4)PMC-Sierra, Inc.

 

 

70,000

 

 

490,000

 

(4)Skyworks Solutions, Inc.

 

 

475,000

 

 

1,995,000

 

 

 

 

 

 

 

4,958,000

 

Telecommunication
Equipment -- 8.8%

 

 

(1)(4)Advanced Fibre Communications, Inc.

 

 

90,000

 

 

1,587,600

 

(1)(4)Powerwave Technologies, Inc.

 

 

475,000

 

 

2,945,000

 

(4)Tekelec

 

 

120,000

 

 

1,178,280

 

(4)UTStarcom, Inc.

 

 

100,000

 

 

1,320,000

 

 

 

 

 

 

 

7,030,880

 

Total Information Technology

 

 

 

 

 

18,350,816

Total Common Stocks
(identified cost $78,888,399)

 

 

 

 

 

77,303,516

 

Description

 

 

Principal
Amount

 

 

Value

(3)Repurchase Agreement -- 1.5%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

1,234,842

 

$

1,234,842

Total Investments
(identified cost $80,123,241)

 

 

 

 

$

78,538,358

International Stock Fund

 

Description

   

 

Shares

   

 

Value
 

Common Stocks -- 100.6%

 

 

 

 

 

 

Australia -- 1.4%

 

 

 

 

 

 

 

Banks -- 1.1%

 

 

 

 

 

 

 

(1)National Australia Bank Ltd., Melbourne

 

 

169,600

 

$

3,230,094

 

Transportation -- 0.3%

 

 

 

 

 

 

 

Qantas Airways Ltd.

 

 

483,900

 

 

1,111,778

 

Total Australia

 

 

 

 

 

4,341,872

Belgium -- 1.5%

 

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

Dexia

 

 

349,300

 

 

4,617,923

Bermuda -- 0.5%

 

 

 

 

 

 

 

IT Consulting & Services -- 0.5%

 

 

 

 

(4)Accenture Ltd.

 

 

99,300

 

 

1,633,485

Brazil -- 1.2%

 

 

 

 

 

 

 

Metals & Mining -- 1.2%

 

 

 

 

 

 

 

Companhia Vale Do Rio Doce, ADR

 

 

159,850

 

 

3,744,713

Canada -- 1.7%

 

 

 

 

 

 

 

Banks -- 1.3%

 

 

 

 

 

 

 

Royal Bank of Canada,
Montreal

 

 

105,200

 

 

3,780,287

 

Financial Services -- 0.4%

 

 

 

 

 

 

 

Manulife Financial Corp.

 

 

55,500

 

 

1,291,700

 

Total Canada

 

 

 

 

 

5,071,987

Finland -- 1.9%

 

 

 

 

 

 

 

IT Consulting & Services -- 0.2%

 

 

 

 

TietoEnator OYJ

 

 

36,800

 

 

566,638

 

Paper & Forest Products -- 0.5%

 

 

 

 

Stora Enso OYJ, Class R

 

 

139,100

 

 

1,536,115

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Nokia OYJ

 

 

51,500

 

 

687,927

 

Nokia OYJ, Class A, ADR

 

 

233,000

 

 

3,096,570

 

 

 

 

 

 

 

3,784,497

 

Total Finland

 

 

 

 

 

5,887,250

France -- 10.5%

 

 

 

 

 

 

 

Banks -- 1.5%

 

 

 

 

 

 

 

BNP Paribas SA

 

 

96,600

 

$

4,505,855

 

Construction Equipment -- 1.9%

 

 

 

 

(1)Technip

 

 

42,300

 

 

3,235,886

 

(1)Vinci SA

 

 

40,000

 

 

2,434,221

 

 

 

 

 

 

 

5,670,107

 

Domestic & International
Oil -- 1.8%

 

 

 

 

(1)Total Fina SA, Class B

 

 

38,300

 

 

5,461,619

 

Healthcare -- 1.0%

 

 

 

 

 

 

 

(1)Aventis SA

 

 

50,300

 

 

2,962,370

 

Industrial Gases -- 0.8%

 

 

 

 

 

 

 

L'Air Liquide SA

 

 

18,262

 

 

2,530,747

 

Media -- 0.9%

 

 

 

 

 

 

 

(1)Thomson Multimedia

 

 

131,872

 

 

2,619,002

 

Metals & Mining -- 0.4%

 

 

 

 

 

 

 

(1)Pechiney SA, Class A

 

 

36,200

 

 

1,325,687

 

Water Treatment -- 2.2%

 

 

 

 

 

 

 

(1)(4)Vivendi Environment

 

 

266,350

 

 

6,572,364

 

(1)(4)Vivendi Environment, Warrants

 

 

48,300

 

 

6,158

 

 

 

 

 

 

 

6,578,522

 

Total France

 

 

 

 

 

31,653,909

Germany -- 5.1%

 

 

 

 

 

 

 

Automotive -- 1.2%

 

 

 

 

 

 

 

Bayerische Motoren Werke AG

 

 

92,200

 

 

3,484,985

 

Drugs -- 0.9%

 

 

 

 

 

 

 

Schering AG

 

 

49,100

 

 

2,716,413

 

Healthcare -- 0.4%

 

 

 

 

 

 

 

(1)Fresenius Medical Care AG

 

 

40,562

 

 

1,157,632

 

Household Product/Wares -- 1.1%

 

 

 

 

Adidas-Salomon AG

 

 

46,400

 

 

3,310,619

 

Insurance -- 1.5%

 

 

 

 

 

 

 

(1)Allianz AG

 

 

10,730

 

 

1,378,466

 

Muenchener Rueckversicherungs-Gesellschaft AG

 

17,720

 

 

3,227,086

 

 

 

 

 

 

 

4,605,552

 

Total Germany

 

 

 

 

 

15,275,201

Hong Kong -- 1.5%

 

 

 

 

 

 

 

Telecommunications -- 0.9%

 

 

 

 

 

 

 

(4)China Mobile (Hong Kong) Ltd.

 

 

936,900

 

 

2,594,526

 

Transportation -- 0.6%

 

 

 

 

 

 

 

Cathay Pacific Airways Ltd.

 

 

1,270,100

 

$

1,970,309

 

Total Hong Kong

 

 

 

 

 

4,564,835

Ireland -- 3.0%

 

 

 

 

 

 

 

Banks -- 2.0%

 

 

 

 

 

 

 

Bank of Ireland

 

 

517,400

 

 

6,018,238

 

Construction Materials -- 1.0%

 

 

 

 

CRH PLC

 

 

210,100

 

 

3,018,714

 

Total Ireland

 

 

 

 

 

9,036,952

Italy -- 4.9%

 

 

 

 

 

 

 

Insurance -- 0.8%

 

 

 

 

 

 

 

Riunione Adriatica di Sicurta SpA

 

 

205,100

 

 

2,353,476

 

Media -- 1.1%

 

 

 

 

 

 

 

(1)Mediaset SpA

 

 

474,400

 

 

3,270,832

 

Oil & Gas Products -- 1.8%

 

 

 

 

 

 

 

(1)ENI SpA

 

 

360,100

 

 

5,452,914

 

Telecommunications -- 1.2%

 

 

 

 

 

 

 

Telecom Italia SpA

 

 

698,300

 

 

3,739,323

 

Total Italy

 

 

 

 

 

14,816,545

Japan -- 12.4%

 

 

 

 

 

 

 

Air Freight & Couriers -- 0.9%

 

 

 

 

(1)Yamato Transport

 

 

157,900

 

 

2,679,652

 

Automotive -- 3.2%

 

 

 

 

 

 

 

(1)Honda Motor Co., Ltd.

 

 

47,100

 

 

1,991,342

 

Nissan Motor Co., Ltd.

 

 

1,062,200

 

 

7,747,212

 

 

 

 

 

 

 

9,738,554

 

Chemical -- 0.6%

 

 

 

 

 

 

 

Takeda Chemical Industries, Ltd.

 

 

43,900

 

 

1,852,352

 

Financial Services -- 0.5%

 

 

 

 

 

 

 

Nomura Securities Co., Ltd.

 

 

108,700

 

 

1,430,902

 

Insurance -- 0.7%

 

 

 

 

 

 

 

(4)Millea Holdings, Inc.

 

 

272

 

 

2,203,765

 

Leisure & Recreation -- 2.3%

 

 

 

 

 

 

(1)(4)Sega Enterprises

 

 

285,200

 

 

6,833,655

 

Office Equipment -- 1.0%

 

 

 

 

 

 

 

(1)Ricoh Co., Ltd.

 

 

168,800

 

 

3,013,905

 

Retail -- 1.7%

 

 

 

 

 

 

 

Ito-Yokado Co., Ltd.

 

 

121,900

 

 

5,184,613

 

Telecommunications -- 1.5%

 

 

 

 

 

 

 

Nippon Television Network Corp.

 

 

318

 

$

1,623,009

 

NTT DoCoMo, Inc.

 

 

1,420

 

 

3,013,770

 

 

 

 

 

 

 

4,636,779

 

Total Japan

 

 

 

 

 

37,574,177

Korea, Republic of -- 5.4%

 

 

 

 

 

 

 

Automotive -- 0.9%

 

 

 

 

 

 

 

Hyundai Motor Co., Ltd.

 

 

94,760

 

 

2,691,821

 

Banks -- 1.3%

 

 

 

 

 

 

 

Kookmin Bank

 

 

75,663

 

 

3,552,728

 

(4)Kookmin Bank, ADR

 

 

9,174

 

 

429,343

 

 

 

 

 

 

 

3,982,071
 

 

Electronics -- 2.0%

 

 

 

 

 

 

 

Samsung Electronics Co.

 

 

21,360

 

 

5,907,060

 

Metals & Mining -- 0.2%

 

 

 

 

 

 

 

Pohang Iron and Steel Co. Ltd., ADR

 

25,200

 

 

575,820

 

Telecommunications -- 1.0%

 

 

 

 

 

 

 

SK Telecom Co., Ltd., ADR

 

 

76,400

 

 

1,662,464

 

(4)KT Corp., ADR

 

 

60,300

 

 

1,369,413

 

 

 

 

 

 

 

3,031,877

 

Total Korea, Republic of

 

 

 

 

 

16,188,649

Mexico -- 5.0%

 

 

 

 

 

 

 

Beverages & Foods -- 1.5%

 

 

 

 

 

 

 

(4)Fomento Economico Mexicano, SA de CV, ADR

 

 

45,600

 

 

1,717,752

 

Grupo Modelo, SA de CV,
Class C

 

 

1,153,100

 

 

2,895,834

 

 

 

 

 

 

 

4,613,586

 

Broadcasting & Cable TV -- 1.0%

 

 

 

 

(4)Grupo Televisa SA, GDR

 

 

95,800

 

 

3,040,692

 

Financial Sevices -- 1.1%

 

 

 

 

 

 

 

Grupo Financiero BBVA Bancomer, SA de CV

 

 

4,198,400

 

 

3,328,232

 

Retail -- 0.3%

 

 

 

 

 

 

 

Wal-Mart de Mexico SA de CV

 

 

278,900

 

 

754,985

 

Telecommunications -- 1.1%

 

 

 

 

 

 

 

Telefonos de Mexico, SA de CV, Class L, ADR

 

 

110,400

 

 

3,271,152

 

Total Mexico

 

 

 

 

 

15,008,647

Netherlands -- 6.3%

 

 

 

 

 

 

 

Chemicals -- 1.1%

 

 

 

 

 

 

 

Akzo Nobel NV

 

 

88,900

 

$

3,314,913

 

Domestic & International Oil -- 1.0%

 

 

 

 

(1)Royal Dutch Petroleum Co.

 

 

68,700

 

 

3,099,366

 

Financial Services -- 1.8%

 

 

 

 

 

 

 

(1)ING Group NV

 

 

199,900

 

 

4,364,115

 

(1)Van der Moolen Holding NV

 

 

39,900

 

 

864,815

 

 

 

 

 

 

 

5,228,930

 

Transportation -- 2.4%

 

 

 

 

 

 

 

TPG NV

 

 

369,900

 

 

7,295,493

 

Total Netherlands

 

 

 

 

 

18,938,702

Russia -- 1.3%

 

 

 

 

 

 

 

Domestic & International
Oil -- 1.3%

 

 

 

 

YUKOS, ADR

 

 

30,500

 

 

3,965,930

Singapore -- 0.3%

 

 

 

 

 

 

 

Technologies -- 0.3%

 

 

 

 

 

 

 

Singapore Technologies Engineering Ltd.

 

 

794,400

 

 

789,928

South Africa -- 0.7%

 

 

 

 

 

 

 

Paper & Forest Products -- 0.7%

 

 

 

 

Sappi Ltd.

 

 

178,400

 

 

2,150,520

Sweden -- 4.3%

 

 

 

 

 

 

 

Commercials Services -- 0.7%

 

 

 

 

(4)Alfa Laval AB

 

 

214,700

 

 

1,942,015

 

Household Product/Wares -- 1.0%

 

 

 

 

(1)Electrolux AB, Class B

 

 

181,800

 

 

3,124,409

 

Industrial Services -- 2.1%

 

 

 

 

 

 

 

Sandvik AB

 

 

136,600

 

 

3,168,901

 

Atlas Copco AB, Class A

 

 

156,710

 

 

3,235,191

 

 

 

 

 

 

 

6,404,092

 

Paper & Forest Products -- 0.5%

 

 

 

 

Svenska Cellulosa AB, Class B

 

 

43,290

 

 

1,476,445

 

Total Sweden

 

 

 

 

 

12,946,961

Switzerland -- 7.2%

 

 

 

 

 

 

 

Banks -- 1.8%

 

 

 

 

 

 

 

(1)UBS AG

 

 

115,390

 

 

5,436,541

 

Beverages & Foods -- 2.1%

 

 

 

 

 

 

 

(1)Nestle SA

 

 

28,770

 

 

6,173,491

 

Construction Materials -- 1.0%

 

 

 

 

 

(1)Holcim Ltd.

 

 

16,170

 

 

3,006,417

 

Insurance -- 0.9%

 

 

 

 

 

 

 

(1)Swiss Re

 

 

37,540

 

$

2,651,766

 

Pharmaceuticals &
Healthcare -- 1.4%

 

(1)Novartis AG

 

 

107,030

 

 

4,343,681

 

Total Switzerland

 

 

 

 

 

21,611,896

Taiwan -- 0.5%

 

 

 

 

 

 

 

Electrical Equipment -- 0.5%

 

 

 

 

 

 

(4)Taiwan Semiconductor Manufacturing Co., ADR

 

 

198,800

 

 

1,624,196

United Kingdom -- 24.0%

 

 

 

 

 

 

 

Aerospace & Defense -- 1.2%

 

 

 

 

BAE Systems PLC

 

 

762,100

 

 

3,609,512

 

Banks -- 2.8%

 

 

 

 

 

 

 

Royal Bank of Scotland PLC, Edinburgh

 

 

225,500

 

 

5,385,519

 

Standard Chartered PLC

 

 

275,200

 

 

3,152,065

 

 

 

 

 

 

 

8,537,584

 

Beverages & Foods -- 1.8%

 

 

 

 

 

 

 

Diageo PLC

 

 

435,700

 

 

5,273,626

 

Containers & Metal/Glass -- 1.0%

 

 

 

 

Rexam PLC

 

 

427,500

 

 

2,951,114

 

Domestic & International
Oil -- 1.1%

 

 

 

 

BP Amoco PLC

 

 

443,400

 

 

3,434,906

 

Gas Distribution -- 0.5%

 

 

 

 

 

 

 

BG Group PLC

 

 

336,900

 

 

1,405,319

 

Healthcare Equipment &
Supplies -- 0.9%

 

 

 

 

Smith & Nephew PLC

 

 

492,800

 

 

2,841,267

 

Hotels & Motels -- 0.9%

 

 

 

 

 

 

 

Six Continents PLC

 

 

275,800

 

 

2,591,182

 

Leisure & Recreation -- 1.4%

 

 

 

 

Hilton Group PLC

 

 

596,900

 

 

1,764,615

 

(4)P&O Princess Cruises PLC

 

 

364,300

 

 

2,368,228

 

 

 

 

 

 

 

4,132,843

 

Manufacturing -- 0.5%

 

 

 

 

 

 

 

Smiths Group PLC

 

 

130,700

 

 

1,476,772

 

Media -- 0.5%

 

 

 

 

 

 

 

WPP Group PLC

 

 

203,900

 

 

1,502,240

 

Description

 

 

Shares or
Principal
Amount

 

 

Value

 

Metals & Mining -- 0.7%

 

 

 

 

 

 

 

Rio Tinto PLC

 

 

111,800

 

$

1,962,320

 

MultiMedia -- 1.6%

 

 

 

 

 

 

 

Pearson PLC

 

 

260,200

 

 

2,585,576

 

Reed International PLC

 

 

260,800

 

 

2,329,155

 

 

 

 

 

 

 

4,914,731

 

Pharmaceuticals &
Healthcare -- 2.2%

 

(4)GlaxoSmithKline PLC

 

 

359,744

 

 

6,770,834

 

Retail -- 4.4%

 

 

 

 

 

 

 

Kingfisher PLC

 

 

2,976,018

 

 

9,799,867

 

Next PLC

 

 

258,900

 

 

3,378,117

 

 

 

 

 

 

 

13,177,984

 

Telecommunications -- 1.6%

 

 

 

 

 

 

 

Vodafone Group PLC

 

 

2,953,721

 

 

4,731,784

 

Tobacco -- 0.9%

 

 

 

 

 

 

 

British American Tobacco PLC

 

 

242,600

 

 

2,819,978

 

Total United Kingdom

 

 

 

 

 

72,133,996

Total Common Stocks
(identified cost $314,559,418)

 

 

 

 

 

303,578,274

(3)Repurchase Agreement -- 0.5%

 

 

 

 

 

State Street Corp., 0.85%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

$

1,548,000

 

 

1,548,000

Total Investments (identified cost $316,107,418)

 

 

 

 

$

305,126,274

Government Income Fund

 

Description

   

 

Principal
Amount

   

 

Value

Asset-Backed Securities -- 4.6%

 

 

 

 

 

Green Tree Home Equity Loan Trust (Series 1998-B), Class B1, 7.810%, 11/15/2029

 

$

6,000,000

 

$

6,232,399

 

Greenwich Capital Acceptance (Series 1995-BA1), Class A4, 7.150%, 8/10/2020

 

 

10,643,000

 

 

11,460,286

Total Asset-Backed Securities
(identified cost $16,665,899)

 

 

 

 

 

17,692,685

Collateralized Mortgage
Obligations -- 19.9%

 

(5)(6)Federal Home Loan Mortgage Corp., 1.940%, 9/25/2002, REMIC
(Series T-32-A1)

 

 

14,700,835

 

 

14,682,225

 

(5)(6)Federal Home Loan Mortgage Corp., 2.563%, 9/15/2002, REMIC (Series 1624-FA)

 

$

2,724,375

 

$

2,730,494

 

Federal Home Loan Mortgage Corp., 6.250%, 9/15/2023, REMIC (Series 1666H)

 

 

15,000,000

 

 

16,231,070

 

(6)Federal Home Loan
Mortgage Corp., 6.500%, 10/15/2016, REMIC (Series 1702-PK)

 

 

10,000,000

 

 

10,771,873

 

(5)(6)Federal National
Mortgage Association, 2.060%, 9/25/2002, REMIC (Series 2001-25-FA)

 

 

20,940,290

 

 

20,729,455

 

Federal National Mortgage Association, 6.022%, 11/25/2010

 

 

10,000,000

 

 

10,913,488

Total Collateralized Mortgage Obligations (identified cost $71,515,992)

 

 

 

 

 

76,058,605

Corporate Bonds -- 1.8%

 

 

 

 

 

 

 

(5)HSB Group, Inc., FRN, 2.770%, 10/15/2002

 

 

3,000,000

 

 

2,828,094

 

(5)TXU Gas Capital, FRN, 3.210%, 10/1/2002

 

 

5,000,000

 

 

3,960,795

Total Corporate Bonds
(identified cost $7,909,300)

 

 

 

 

 

6,788,889

Mortgage Backed
Securities -- 66.4%

 

 

 

 

Federal Home Loan Mortgage
Corporation -- 18.1%

 

5.000%, 8/1/2014

 

 

12,529,301

 

 

12,705,210

 

6.000%, 6/15/2011

 

 

5,000,000

 

 

5,520,705

 

6.500%, 9/1/2016

 

 

4,203,886

 

 

4,399,461

 

(1)6.500%, 2/1/2031

 

 

16,371,473

 

 

16,948,434

 

(7)6.500%, 10/1/2032

 

 

15,000,000

 

 

15,501,600

 

7.000%, 11/1/2009

 

 

2,156,918

 

 

2,284,185

 

7.500%, 9/1/2013

 

 

780,814

 

 

831,900

 

7.500%, 4/1/2024

 

 

2,138,333

 

 

2,267,806

 

7.500%, 4/1/2027

 

 

1,689,981

 

 

1,787,085

 

8.000%, 8/1/2030

 

 

2,843,753

 

 

3,030,272

 

8.500%, 9/1/2024

 

 

863,680

 

 

935,672

 

9.000%, 6/1/2019

 

 

1,308,992

 

 

1,448,281

 

9.500%, 2/1/2025

 

 

1,225,484

 

 

1,367,597

 

 

 

 

 

 

 

69,028,208

 

Federal National Mortgage
Association -- 26.5%

 

6.000%, 9/1/2013

 

 

9,644,061

 

 

10,054,375

 

6.500%, 9/1/2016

 

 

4,370,818

 

 

4,575,955

 

6.500%, 9/1/2016

 

 

8,384,476

 

 

8,777,987

 

6.500%, 12/1/2031

 

 

4,563,091

 

 

4,718,694

 

(7)6.500%, 11/1/2032

 

 

25,000,000

 

 

25,742,200

 

7.000%, 12/1/2010

 

 

3,801,797

 

 

4,030,652

 

7.000%, 3/1/2029

 

$

4,434,074

 

$

4,624,852

 

7.000%, 7/1/2029

 

 

9,781,626

 

 

10,202,485

 

7.000%, 2/1/2030

 

 

8,160,227

 

 

8,511,325

 

(1)7.500%, 12/1/2009

 

 

6,297,098

 

 

6,734,252

 

(6)7.500%, 10/1/2030

 

 

4,388,749

 

 

4,622,949

 

8.000%, 10/1/2028

 

 

4,733,011

 

 

5,088,822

 

8.000%, 4/1/2030

 

 

3,231,734

 

 

3,444,679

 

 

 

 

 

 

 

101,129,227

 

Government National Mortgage
Association -- 21.8%

 

6.500%, 12/15/2029

 

 

4,968,491

 

 

5,169,908

 

(7)6.500%, 10/1/2032

 

 

20,000,000

 

 

20,737,600

 

(1)7.000%, 4/15/2029

 

 

6,413,460

 

 

6,723,170

 

(1)7.000%, 5/15/2029

 

 

4,374,255

 

 

4,584,362

 

(1)7.000%, 6/15/2029

 

 

6,513,871

 

 

6,826,749

 

(1)7.000%, 8/15/2031

 

 

5,747,841

 

 

6,021,863

 

(1)7.500%, 8/15/2025

 

 

8,127,315

 

 

8,638,882

 

(1)7.500%, 8/15/2025

 

 

1,802,535

 

 

1,917,957

 

(1)7.500%, 12/15/2025

 

 

6,422,391

 

 

6,826,644

 

(1)7.500%, 2/15/2027

 

 

8,934,626

 

 

9,466,695

 

(1)8.500%, 6/15/2010

 

 

1,652,729

 

 

1,800,833

 

(1)9.000%, 11/15/2009

 

 

2,699,988

 

 

2,924,537

 

(1)9.000%, 1/15/2010

 

 

849,779

 

 

927,682

 

(1)9.500%, 10/15/2024

 

 

531,137

 

 

599,267

 

 

 

 

 

 

 

83,166,149

Total Mortgage Backed
Securities (identified cost $241,770,303)

 

 

 

 

 

253,323,584

U.S. Treasury Notes -- 7.9%

 

 

 

 

 

 

 

4.375%, 8/15/2012

 

 

19,000,000

 

 

19,367,384

 

(1)4.875%, 2/15/2012

 

 

10,000,000

 

 

10,592,970

Total U.S. Treasury Notes
(identified cost $29,238,828)

 

 

 

 

 

29,960,354

Total Investments in Securities (identified cost $367,100,322)

 

 

 

 

 

383,824,117

(3)Repurchase
Agreements -- 15.3%

 

 

 

 

Bear Stearns Co., Inc., 1.800%, dated 8/1/2002, due 9/3/2002

 

 

10,000,000

 

 

10,000,000

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002

 

 

48,385,876

 

 

48,385,876

Total Repurchase Agreements
(at amortized cost)

 

 

 

 

 

58,385,876

Total Investments (identified cost $425,486,198)

 

 

 

 

$

442,209,993

Intermediate Bond Fund

 

 

Description

   

 

Principal
Amount

   

 

Value

Asset-Backed Securities -- 8.5%

 

 

 

 

 

 

 

Citibank Credit Card Issuance Trust, (Series 2002-A1), Class A1, 4.950%, 2/9/2009

 

$

6,000,000

 

$

6,310,545

 

Citibank Credit Card Master Trust I, (Series 1999-7), Class A, 6.650%, 11/15/2006

 

 

5,000,000

 

 

5,421,882

 

(5)(8)(9)DLJ Commercial Mortgage Corp., (Series 1998-STF2), Class A1, 2.469%, 9/5/2002

 

 

715,169

 

 

713,939

 

(1)DaimlerChrysler Auto Trust, (Series 2000-C) Class A3, 6.820%, 9/6/2004

 

 

3,808,618

 

 

3,881,194

 

First USA Credit Card Master Trust, (Series 1998-9), Class A, 5.280%, 9/18/2006

 

 

7,750,000

 

 

8,073,944

 

Ford Credit Auto Owner Trust, (Series 2000-G), Class A4, 6.620%, 7/15/2004

 

 

5,918,545

 

 

6,050,204

 

Green Tree Home Equity Loan Trust, (Series 1998-B), Class B1, 7.810%, 11/15/2029

 

 

7,000,000

 

 

7,271,132

 

J.P. Morgan Commercial Mortgage Finance Corp., (Series 1997-C5), Class A2, 7.069%, 9/15/2029

 

 

6,760,314

 

 

7,266,747

 

(8)(9)Pegasus Aviation Lease Securitization, (Series
1999-1A), Class A1, 6.300%, 3/25/2029

 

 

1,939,635

 

 

1,844,029

 

(8)(9)Systems 2001 Asset Trust, Pass Thru Cert., 6.664%, 9/15/2013

 

 

6,344,763

 

 

6,796,140

Total Asset-Backed Securities (identified cost $51,341,322)

 

 

 

 

 

53,629,756

Collateralized Mortgage
Obligations -- 4.9%

 

(8)(9)Criimi Mae CMBS Corp., (Series 1998-1), Class A2, 6.009%, 2/20/2005

 

 

5,000,000

 

 

5,301,367

 

(8)(9)Criimi Mae CMBS Corp., (Series 1998-1), Class A3, 6.306%, 6/20/2030

 

 

6,000,000

 

 

6,416,189

 

Fannie Mae, (Series
1993-137), Class PH, 6.550%, 12/25/2021

 

 

7,000,000

 

 

7,194,550

 

Federal Home Loan Mortgage Corp., (Series 1829), Class H, 6.500%, 10/15/2021

 

 

1,117,081

 

 

1,121,661

 

Government National Mortgage Association, (Series 2000-12), Class AC, 7.500%, 11/16/2027

 

 

2,170,334

 

 

2,219,720

 

Government National Mortgage Association, (Series 2001-5), Class PK, 5.950%, 7/20/2024

 

 

7,118,965

 

 

7,277,632

 

(8)(9)Prudential Home Mortgage Securities, (Series 1993-H), Class 2B, 6.751%, 9/28/2008

 

 

1,465,454

 

 

1,513,103

Total Collateralized Mortgage Obligations
(identified cost $29,934,161)

 

 

 

 

 

31,044,222

Corporate Bonds & Notes -- 54.6%

 

 

 

 

Automotive & Related -- 8.8%

 

 

 

 

Ford Motor Credit Co., Note, 6.125%, 3/20/2004

 

 

8,000,000

 

 

8,054,024

 

(1)Ford Motor Credit Co., Note, 6.500%, 1/25/2007

 

 

4,000,000

 

 

3,943,856

 

(1)Ford Motor Credit Co., Note, 6.700%, 7/16/2004

 

 

7,000,000

 

 

7,122,850

 

Ford Motor Credit Co., Note, 7.375%, 10/28/2009

 

 

485,000

 

 

475,349

 

Ford Motor Credit Co., Note, 7.750%, 3/15/2005

 

 

5,000,000

 

 

5,174,645

 

General Motors Acceptance Corp., Note, 6.125%, 9/15/2006

 

 

5,000,000

 

 

5,049,255

 

(1)General Motors Acceptance Corp., Note, 6.380%, 1/30/2004

 

 

3,000,000

 

 

3,074,772

 

(1)General Motors Acceptance Corp., Note, 6.875%, 9/15/2011

 

 

7,000,000

 

 

6,985,251

 

(1)General Motors Acceptance Corp., Note, 6.875%, 8/28/2012)

 

 

5,000,000

 

 

4,943,225

 

General Motors Acceptance Corp., Unsecd. Note, 7.000%, 6/6/2003

 

 

6,000,000

 

 

6,158,802

 

(1)General Motors Corp., Note, 7.200%, 1/15/2011

 

 

5,000,000

 

 

5,107,805

 

 

 

 

 

 

 

56,089,834

 

Banks -- 5.3%

 

 

 

 

 

 

 

(1)Bank One Corp., Sub. Note, 7.875%, 8/1/2010

 

 

5,000,000

 

 

5,900,860

 

Citicorp, Sub. Note, (Series F), 6.375%, 11/15/2008

 

 

7,000,000

 

 

7,571,914

 

Citigroup, Inc., Note, 5.750%, 5/10/2006

 

 

5,000,000

 

 

5,295,745

 

Corestates Capital, Company Guarantee, 6.750%, 11/15/2006

 

 

5,790,000

 

 

6,388,535

 

(1)J.P. Morgan Chase & Co., Note, 5.250%, 5/30/2007

 

 

8,000,000

 

 

8,244,304

 

 

 

 

 

 

 

33,401,358

 

Beverages & Foods -- 1.9%

 

 

 

 

 

 

 

Anheuser-Busch Cos., Inc., Deb., 9.000%, 12/1/2009

 

 

5,000,000

 

 

6,377,490

 

(1)The Kroger Co., Company Guarantee, 6.750%, 4/15/2012

 

 

5,000,000

 

 

5,401,215

 

 

 

 

 

 

 

11,778,705

 

Broker/Dealers -- 3.7%

 

 

 

 

 

 

 

Goldman Sachs Group, Inc., Bond, 6.875%, 1/15/2011

 

 

2,000,000

 

 

2,177,580

 

Lehman Brothers, Inc., Note, 6.250%, 5/15/2006

 

 

1,000,000

 

 

1,069,477

 

Merrill Lynch & Co., Inc., Note, (Series MTNB), 5.350%, 6/15/2004

 

 

6,500,000

 

 

6,779,734

 

(1)Morgan Stanley, Note, 6.600%, 4/1/2012

 

 

7,000,000

 

 

7,467,782

 

PaineWebber Group, Inc., Note, 6.450%, 12/1/2003

 

 

6,000,000

 

 

6,326,136

 

 

 

 

 

 

 

23,820,709

 

Chemicals -- 0.6%

 

 

 

 

 

 

 

(1)(8)(9)Dow Chemical Co., Note, 5.250%, 5/14/2004

 

 

3,500,000

 

 

3,578,138

 

Construction Equipment -- 0.3%

 

 

 

 

CRH America, Inc., Note, 6.950%, 3/15/2012

 

 

2,000,000

 

 

2,204,216

 

Consumer Cyclical -- 0.3%

 

 

 

 

 

 

 

(1)Tyco International Group, Company Guarantee, 5.800%, 8/1/2006

 

 

2,500,000

 

 

2,114,615

 

Domestic & International
Oil -- 2.3%

 

Conoco, Inc., Sr. Note, 6.350%, 4/15/2009

 

 

6,000,000

 

 

6,477,906

 

Occidental Petroleum Corp., Sr. Note, 6.500%, 4/1/2005

 

 

3,500,000

 

 

3,767,971

 

PanCanadian Energy Corp., Bond, 6.300%, 11/1/2011

 

 

4,000,000

 

 

4,166,088

 

 

 

 

 

 

 

14,411,965

 

Federal National Mortgage
Association -- 1.8%

 

Fannie Mae, Note, 6.625%, 10/15/2007

 

 

10,000,000

 

 

11,379,040

 

Financial Services -- 11.7%

 

 

 

 

 

 

 

(1)Countrywide Home Loans, Inc., Company Guarantee, (Series MTNK), 5.625%, 5/15/2007

 

 

7,000,000

 

 

7,231,861

 

(5)(8)(9)Credit Suisse, London, Sub. Note, 7.900%, 5/1/2007

 

 

5,000,000

 

 

5,427,165

 

EOP Operating LP, Note, 7.375%, 11/15/2003

 

 

4,000,000

 

 

4,189,872

 

General Electric Capital Corp., Note, (Series A), 6.500%, 12/10/2007

 

 

5,000,000

 

 

5,565,985

 

General Electric Capital Corp., Note, (Series MTNA), 6.800%, 11/1/2005

 

 

4,000,000

 

 

4,410,764

 

(1)Household Finance Corp., Note, 7.000%, 5/15/2012

 

 

6,000,000

 

 

6,039,234

 

Household Netherlands BV, Company Guarantee, 6.200%, 12/1/2003

 

 

4,000,000

 

 

4,081,680

 

International Lease Finance Corp., Note, 5.625%, 6/1/2007

 

 

5,000,000

 

 

5,115,585

 

(1)(5)MBNA Global Capital Securities, Jr. Sub. Deb., (Series B), 2.623%, 11/1/2002

 

 

5,000,000

 

 

3,442,335

 

(1)National Rural Utilities Cooperative Finance Corp., Note, 5.75%, 8/28/2009

 

 

3,500,000

 

 

3,503,248

 

SLM Corporation, Note, (Series MTNA), 5.625%, 4/10/2007

 

 

5,000,000

 

 

5,345,735

 

(5)UBS Preferred Funding Trust II, Bank Guarantee, 8.622%, 10/1/2002

 

 

7,000,000

 

 

8,288,308

 

Wells Fargo Financial, Inc., Note, 4.875%, 6/12/2007

 

 

5,000,000

 

 

5,187,610

 

Wells Fargo Financial, Inc., Note, 5.875%, 8/15/2008

 

 

6,000,000

 

 

6,447,588

 

 

 

 

 

 

 

74,276,970

 

Forest Products & Paper -- 0.4%

 

 

 

 

Reed Elsevier, Capital, Company Guarantee, 6.125%, 8/1/2006

 

 

2,500,000

 

 

2,648,525

 

Household Product/
Wares -- 0.9%

 

 

 

 

(1)Procter & Gamble Co., Unsub., 6.600%, 12/15/2004

 

 

5,000,000

 

 

5,428,760

 

Insurance -- 4.7%

 

 

 

 

 

 

 

(8)(9)AIG SunAmerica Global Financial, Note, 5.850%, 8/1/2008

 

 

7,000,000

 

 

7,494,739

 

(8)(9)Allstate Financial Global, Note, 7.125%, 9/26/2005

 

 

5,500,000

 

 

6,093,522

 

(5)HSB Group, Inc., Company Guarantee, (Series B), 2.770%, 10/15/2002

 

 

4,000,000

 

 

3,770,792

 

(8)(9)John Hancock Financial Services, Inc., 6.500%, 3/1/2011

 

 

3,500,000

 

 

3,691,149

 

MGIC Investment Corp., Sr. Note, 6.00%, 3/15/2007

 

 

3,000,000

 

 

3,218,499

 

Prudential Funding Corp., Note, (Series MTN), 6.600%, 5/15/2008

 

 

5,000,000

 

  

5,336,375

 

 

 

 

 

 

 

29,605,076

 

Media -- 2.4%

 

 

 

 

 

 

 

(1)AOL Time Warner, Inc., Note, 6.125%, 4/15/2006

 

 

4,000,000

 

 

3,703,788

 

(1)AOL Time Warner, Inc., Note, 6.875%, 5/1/2012

 

 

3,000,000

 

 

2,708,313

 

(1)Comcast Corp., Sr. Note, 6.750%, 1/30/2011

 

 

3,000,000

 

 

2,761,395

 

(1)Viacom, Inc., Note, 5.625%, 5/1/2007

 

 

6,000,000

 

 

6,273,840

 

 

 

 

 

 

 

15,447,336

 

Metals -- 0.3%

 

 

 

 

 

 

 

(1)Alcoa, Inc., Note, 5.875%, 6/1/2006

 

 

1,965,000

 

 

2,110,872

 

Telecommunications -- 4.1%

 

 

 

 

AT&T Wireless Services, Inc., Note, 8.125%, 5/1/2012

 

 

2,000,000

 

 

1,713,232

 

BT Group PLC, Note, 7.875%, 12/15/2005

 

 

5,000,000

 

 

5,480,015

 

(1)BT Group PLC, Note, 8.375%, 12/15/2010

 

 

5,000,000

 

 

5,726,500

 

SBC Communications, Inc., Note, 5.875%, 8/15/2012

 

 

3,000,000

 

 

3,052,983

 

Telstra Corp. Ltd., Note, 6.375%, 4/1/2012

 

 

5,000,000

 

 

5,375,905

 

(1)(8)(9)Verizon Global Funding Corp., Note, 7.250%, 12/1/2010

 

 

3,000,000

 

 

2,997,681

 

Verizon Global Funding Corp., Note, 7.375%, 9/1/2012

 

 

2,000,000

 

 

1,995,092

 

 

 

 

 

 

 

26,341,408

 

Transportation -- 1.7%

 

 

 

 

 

 

 

American Trans Air, (Series 2001-1G), Pass Through Cert., 8.039%, 1/15/2016

 

 

4,658,802

 

 

4,608,302

 

Continental Airlines, Inc., Pass Through Cert., 6.541%, 9/15/2009

 

 

3,377,090

 

 

3,054,740

 

Delta Air Lines, Inc., Equipment Trust, (Series 1993-A2), 10.500%, 4/30/2016

 

 

4,000,000

 

 

3,425,020

 

 

 

 

 

 

 

11,088,062

 

Utilities-Electric -- 2.5%

 

 

 

 

 

 

 

Limestone Electronic Trust, Sr. Note, 8.625%, 3/15/2003

 

 

5,000,000

 

 

4,953,150

 

(8)(9)Pinnacle Partner, Sr. Note, 8.830%, 8/15/2004

 

 

3,000,000

 

 

2,791,695

 

(8)(9)Southern Power Co., Sr. Note, 6.25%, 7/15/2012

 

 

3,000,000

 

 

3,168,684

 

TransAlta Corp., Note, 6.750%, 7/15/2012

 

 

5,000,000

 

 

5,196,380

 

 

 

 

 

 

 

16,109,909

 

Utilities-Natural Gas -- 0.9%

 

 

 

 

(5)TXU Gas Capital I, Company Guarantee, 3.210%, 10/1/2002

 

 

7,000,000

 

 

5,545,113

Total Corporate Bonds & Notes (identified cost $339,682,222)

 

 

 

 

 

347,380,611

Government Agencies -- 8.7%

 

 

 

 

 

 

 

Federal Home Loan Bank -- 0.8%

 

 

 

 

5.430%, 11/17/2008

 

 

5,000,000

 

 

5,397,265

 

Federal National Mortgage
Association -- 6.2%

 

5.500%, 2/15/2006

 

 

10,000,000

 

 

10,835,530

 

6.250%, 2/1/2011

 

 

16,000,000

 

 

17,444,032

 

7.000%, 7/15/2005

 

 

10,000,000

 

 

11,171,500

 

 

 

 

 

 

 

39,451,062

 

Tennessee Valley
Authority -- 1.7%

 

 

 

 

5.625%, 1/18/2011

 

 

10,000,000

 

 

10,661,870

Total Government Agencies (identified cost $52,074,058)

 

 

 

 

 

55,510,197

Mortgage Backed Securities -- 7.9%

 

 

 

 

Federal Home Loan Mortgage
Corporation -- 1.3%

 

(1)7.500%, 2/1/2031

 

 

5,578,686

 

 

5,877,907

 

(1)7.500%, 6/1/2031

 

 

2,036,164

 

 

2,145,392

 

 

 

 

 

 

 

8,023,299

 

Federal National Mortgage
Association -- 4.5%

 

6.500%, 10/1/2031

 

 

14,365,225

 

 

14,855,084

 

(1)7.000%, 12/1/2015

 

 

8,123,133

 

 

8,601,515

 

7.635%, 8/1/2011

 

 

4,706,033

 

 

5,340,424

 

 

 

 

 

 

 

28,797,023

 

Government National Mortgage
Association -- 2.1%

 

7.000%, 3/15/2032

 

 

13,043,158

 

 

13,664,561

Total Mortgage Backed Securities (identified cost $49,219,891)

 

 

 

 

50,484,883

U.S. Treasury Securities -- 8.0%

 

 

 

 

 

U.S. Treasury Notes -- 8.0%

 

 

 

 

 

(1)4.375%, 5/15/2007

 

 

3,000,000

 

 

3,160,197

 

4.375%, 8/15/2012

 

 

25,000,000

 

 

25,483,400

 

(1)4.875%, 2/15/2012

 

 

3,000,000

 

 

3,177,891

 

5.000%, 8/15/2011

 

 

500,000

 

 

535,001

 

6.000%, 8/15/2004

 

 

2,000,000

 

 

2,149,220

 

(1)7.250%, 5/15/2004

 

 

15,000,000

 

 

16,318,950

Total U.S. Treasury Securities (identified cost $50,041,621)

 

 

 

 

 

50,824,659

Total Investments in Securities (identified cost $572,293,275)

 

 

 

 

 

588,874,328

(3)Repurchase Agreement -- 6.5%

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

 

41,098,877

 

 

41,098,877

Total Investments (identified cost $613,392,152)

 

 

 

 

$

629,973,205

Intermediate Tax-Free Fund

 

Description/Credit Rating(10)

Principal
Amount

Value

Long-Term Municipals -- 96.8%

 

 

 

 

Arizona -- 7.4%

 

 

 

 

 

 

 

Maricopa County, AZ, School District No. 214 Tolleson Unified High, GO UT, 5.100% (FSA INS)/(Original Issue Yield: 5.099%), 7/1/2010, Callable 7/1/2009 @ 101, AAA / Aaa

 

$

1,000,000

 

$

1,103,560

 

Maricopa County, AZ, School District No. 28 Kyrene Elementary, (Series A), 5.000% (MBIA INS)/(Original Issue Yield: 4.590%), 7/1/2013, AAA / Aaa

 

 

1,885,000

 

 

2,078,797

 

Mesa, AZ, Street and Highway, Refunding Revenue Bond, 4.000% (FSA), 7/1/2014, Callable 7/1/2012 @ 100, AAA / Aaa

 

 

2,120,000

 

 

2,126,742

 

Phoenix, AZ ,Civic Improvement Corp., 5.125% (FGIC INS)/(Original Issue Yield: 4.570%), 7/1/2014, AAA / Aaa

 

 

2,000,000

 

 

2,228,160

 

Phoenix, AZ, Civic Improvement Corp., Water Systems Refunding Revenue Bonds, 5.250% (FGIC LOC)/(Original Issue Yield: 4.690%), 7/1/2016, AAA / Aaa

 

 

500,000

 

 

559,060

 

 

 

 

 

 

 

8,096,319

Arkansas -- 1.2%

 

 

 

 

Arkansas Development Finance Authority, Revenue Bonds, 5.000% (AMBAC INS)/(Original Issue Yield: 5.055%), 7/1/2020, Callable 7/1/2007 @ 102, AAA / Aaa

 

$

1,300,000

 

$

1,345,578

 

Colorado -- 5.0%

 

 

 

 

 

 

 

El Paso County, CO, School District No. 49, GO UT, 5.750% (FGIC)/(Original Issue Yield: 4.750%), 12/1/2013, AAA / Aaa

 

 

1,875,000

 

 

2,157,506

 

Larimer County, CO, School District, GO UT, 5.500% (FGIC INS)/(Original Issue Yield: 4.420%), 12/15/2006, AAA / Aaa

 

 

3,000,000

 

 

3,369,330

 

 

 

 

 

 

 

5,526,836

 

Connecticut -- 1.7%

 

 

 

 

 

 

 

Connecticut State, CT, Ad Valorem Property Tax, GO UT, (Series C), 5.000% (Original Issue Yield: 3.280%), 12/15/2007, AA / Aa2

 

 

1,700,000

 

 

1,892,831

 

Florida -- 1.0%

 

 

 

 

 

 

 

Orange County, FL, Health Facilities Authority, Refunding Revenue Bonds, (Adventist Health Systems), 5.550% (Original Issue Yield: 5.750%), 11/15/2004, A- / Baa1

 

 

1,060,000

 

 

1,123,208

 

Georgia -- 0.9%

 

 

 

 

 

 

 

Burke County, GA, Development Authority, PCR Bonds, 6.250% (Oglethorpe Power Corp. Vogtle B)/(MBIA INS), 1/1/2003, AAA / Aaa

 

 

1,000,000

 

 

1,015,930

 

Hawaii -- 1.0%

 

 

 

 

 

 

 

Hawaii State Airport System, Refunding Revenue Bonds, 5.250% (FGIC INS)/(Original Issue Yield: 4.770%), 7/1/2011, AAA / Aaa

 

 

1,000,000

 

 

1,095,990

 

Illinois -- 2.1%

 

 

 

 

 

 

 

Du Page County, IL, GO UT, 5.000% (Original Issue Yield: 4.460%), 1/1/2015,
AAA / Aaa

 

 

1,000,000

 

 

1,064,300

 

University of Illinois, 5.250% (AMBAC INS)/(Original Issue Yield: 4.530%), 4/1/2013, AAA / Aaa

 

$

1,060,000

 

$

1,185,907

 

 

 

 

 

 

 

2,250,207

 

Indiana -- 3.4%

 

 

 

 

 

 

 

Indianapolis, IN, Marion County Indiana Public Library, GO UT, 5.800%, 7/1/2012, Callable 1/1/2009 @ 101, Aa2

 

 

1,425,000

 

 

1,645,362

 

Petersburg, IN, PCA, Revenue Bonds, 6.100% (MBIA INS)/(Original Issue Yield: 6.099%), 1/1/2016, Callable 1/1/2003 @ 102, AAA / Aaa

 

 

2,000,000

 

 

2,066,860

 

 

 

 

 

 

 

3,712,222

 

Iowa -- 2.8%

 

 

 

 

 

 

 

Iowa Finance Authority, Solid Waste Disposal Project, Revenue Bonds, AMT, 6.000% (Ipsco, Inc.), Due 6/1/2027, Mandatory Tender 6/1/2007, Callable 6/1/2007 @ 100, NR

 

 

3,000,000

 

 

3,101,910

 

Kansas -- 1.1%

 

 

 

 

 

 

 

Sedgwick County, KS, Unified School District, District No. 259, 6.000%, (Original Yield: 4.640%) 9/1/2008, AA / Aa3

 

 

1,000,000

 

 

1,158,580

 

Kentucky -- 2.7%

 

 

 

 

 

 

 

Kentucky State Property & Buildings Commission, Refunding Revenue Bonds, 6.000% (FSA INS)/(Original Issue Yield: 5.510%), 2/1/2011, Callable 2/1/2010 @ 100, AAA / Aaa

 

 

2,565,000

 

 

2,989,148

 

Massachusetts -- 2.7%

 

 

 

 

 

 

 

Massachusetts State, (Series A), 6.000% (Original Issue Yield: 5.670%), 2/1/2014, Callable 2/1/2010 @ 101, AA- / Aa2

 

 

2,500,000

 

 

2,938,175

 

Michigan -- 8.0%

 

 

 

 

 

 

 

Armada, MI, Area Schools, GO UT, 4.550% (Q-SBLF LOC), 5/1/2015, Callable 5/1/2012 @ 100, AAA

 

 

765,000

 

 

784,201

 

Detroit, MI, City School District, (Series B), 5.000% (FGIC INS)/(Original Issue Yield: 4.500%), 5/1/2009, AAA / Aaa

 

$

3,300,000

 

$

3,634,686

 

Michigan Municipal Bond Authority, Clean Water Revenue Fund, Refunding Revenue Bonds, 4.000% (Original Issue Yield: 4.670%), 10/1/2004, AAA / Aaa

 

 

2,500,000

 

 

2,622,325

 

Michigan State Building Authority, (Series I), 5.500% (Original Issue Yield: 4.250%), 10/15/2009, AA+ / Aa1

 

 

1,500,000

 

 

1,703,520

 

 

 

 

 

 

 

8,744,732

 

Minnesota -- 6.1%

 

 

 

 

 

 

 

Minneapolis/St. Paul, MN, Housing Authority, Refunding Revenue Bonds, AMT, 6.750%, (Group Health Plan, Inc. Project), 12/1/2013, Callable 12/1/2002 @ 102,
BBB+ / Baa1

 

 

1,000,000

 

 

1,023,220

 

Minneapolis/St. Paul, MN, Metropolitan Airports Commission, (Series B), AMT, 5.250% (FGIC INS)/(Original Issue Yield: 4.070%), 1/1/2006, AAA

 

 

3,000,000

 

 

3,240,420

 

Mounds View, MN, Independent School District No. 621, GO UT, 5.000% (MBIA INS)/(Original Issue Yield: 4.450%), 2/1/2013, NR / Aaa

 

 

2,235,000

 

 

2,432,440

 

 

 

 

 

 

 

6,696,080

 

Nevada -- 4.4%

 

 

 

 

 

 

 

Clark County, NV, School District, GO UT, 5.250% (Original Issue Yield: 4.880%), 6/15/2013, Callable 6/15/2009 @ 100, AAA / Aaa

 

 

2,500,000

 

 

2,716,225

 

Clark County, NV, School District, GO UT, (Series D), Refunding Bonds, 5.250%, 6/15/2014, Callable 6/15/2011 @ 105, AAA / Aaa

 

 

1,880,000

 

 

2,093,267

 

 

 

 

 

 

 

4,809,492

New Mexico -- 3.5%

 

 

 

 

New Mexico State Highway Commission, Refunding Revenue Bonds, 6.000% (Original Issue Yield: 5.370%), 6/15/2010, Callable 6/15/2009 @ 100, AA + / Aa2

 

$

3,325,000

 

$

3,822,486

 

New York -- 2.4%

 

 

 

 

 

 

 

Oswego County, NY, GO UT , 6.700% (Original Issue Yield: 6.800%), 6/15/2010, A2

 

 

1,100,000

 

 

1,328,635

 

Oswego County, NY, GO UT, 6.700% (Original Issue Yield: 6.800%), 6/15/2011, A2

 

 

1,100,000

 

 

1,347,181

 

 

 

 

 

 

 

2,675,816

 

North Dakota -- 4.7%

 

 

 

 

 

 

 

Fargo, ND, Meritcare Obligated, (Series A), 5.750% (FSA INS)/(Original Issue Yield: 5.300%), 6/1/2012, Callable 6/1/2010 @ 101, AAA / Aaa

 

 

2,940,000

 

 

3,353,658

 

North Dakota State Water Authority, Revenue Bonds, (Series A), 6.000%, (MBIA INS)/(Original Issue Yield: 5.390%), 8/1/2011, Callable 8/1/2010 @ 100, AAA

 

 

1,545,000

 

 

1,786,576

 

 

 

 

 

 

 

5,140,234

 

Ohio -- 2.0%

 

 

 

 

 

 

  Ohio HFA, Mortgage Refunding Revenue Bonds, AMT, Residential A-1 RMK, 5.150% (GNMA COL), 9/1/2002, NR / Aaa    
1,180,000
1,180,000

 

Sidney, OH, Industrial Development, Refunding Revenue Bonds, 5.400% (Fort Wayne National Bank LOC)/(Original Issue Yield: 5.399%), 9/15/2005, Callable 9/15/2002 @ 104, NR

 

 

1,000,000

 

 

1,053,810

 

 

 

 

 

 

 

2,233,810

 

Oregon -- 1.0%

 

 

 

 

 

 

 

Salem-Keizer, OR, School District No. 24J, 5.375% (FGIC INS)(School Board Guarantee), 6/1/2014, Callable 6/1/2009 @ 100, AAA / Aaa

 

 

1,000,000

 

 

1,084,760

Pennsylvania -- 6.3%

 

 

 

 

Commonwealth of Pennsylvania, 6.000% (Original Issue Yield: 5.540%), 1/15/2012, Callable 1/15/2010 @ 101, AA / Aa2

 

$

4,000,000

 

$

4,621,240

 

Pottsville, PA, Hospital Authority, 7.000% (Original Issue Yield: 7.500%), 7/1/2014, PRF 7/1/2004 @ 102, AAA

 

 

2,000,000

 

 

2,230,060

 

 

 

 

 

 

 

6,851,300

 

South Carolina -- 3.9%

 

 

 

 

 

 

 

South Carolina State, GO UT, (Series B), 5.625%, (Original Issue Yield: 5.600%, 7/1/2011, Callable 7/1/2006 @ 102, AAA / Aaa

 

 

1,055,000

 

 

1,154,972

 

South Carolina State Public Service Authority, (Series A), 5.375% (MBIA INS)/(Original Issue Yield: 4.800%), 1/1/2006, AAA / Aaa

 

 

2,835,000

 

 

3,104,580

 

 

 

 

 

 

 

4,259,552

 

South Dakota -- 1.5%

 

 

 

 

 

 

 

Heartland Consumers Power District, SD, Refunding Revenue Bonds, 5.900% (FSA INS)/(Original Issue Yield: 6.000%), 1/1/2004, AAA / Aaa

 

 

1,500,000

 

 

1,583,610

 

Tennessee -- 1.2%

 

 

 

 

 

 

 

Putnam County, TN, GO UT, 5.250% (FGIC INS)/(Original Issue Yield: 4.530%), 4/1/2013, A2

 

 

1,200,000

 

 

1,345,860

 

Texas -- 3.2%

 

 

 

 

 

 

 

Tarrant County, TX, HFDC, Revenue Bonds, 5.750% (Texas Health Resources System)/(MBIA INS), 2/15/2009, Callable 2/15/2008 @ 102,
AAA / Aaa

 

 

2,000,000

 

 

2,257,580

 

Texas Water Development Board, State Revolving Fund Senior Lien Revenue Bonds, (Series A), 5.250% (Original Issue Yield: 4.900%), 7/15/2004, AAA / Aaa

 

 

1,180,000

 

 

1,258,871

 

 

 

 

 

 

 

3,516,451

Virginia -- 3.7%

 

 

 

 

Loudoun County, VA, State Aid Withholding, GO UT, (Series B), 5.750%, 1/1/2011, Callable 1/1/2010 @ 101, AA / Aa1

 

$

2,190,000

 

$

2,511,558

 

Suffolk, VA, Redevelopment & Housing Authority, Revenue Refunding Bonds, 4.850%, (FNMA LIQ), 7/1/2031, Aaa

 

 

1,500,000

 

 

1,591,620

 

 

 

 

 

 

 

4,103,178

 

Washington -- 1.0%

 

 

 

 

 

 

 

Port Longview, WA, IDC, Solid Waste Disposal Revenue Bonds, 6.875% (AMT for Individuals Only)
(Weyerhaeuser Co.), 10/1/2008, A

 

 

1,000,000

 

 

1,119,290

 

Wisconsin -- 10.9%

 

 

 

 

 

 

 

Appleton, WI, Waterworks, Refunding Revenue Bonds, 5.000%, (FGIC INS)/
(Original Issue Yield: 4.580%), 1/1/2013,
NR / Aaa

 

 

2,555,000

 

 

2,770,668

 

Cedarburg, WI, School District, (Series B), 5.375% (FSA INS)/(Original Issue Yield: 5.000%), 3/1/2016, Callable 3/1/2011 @ 100, Aaa

 

 

940,000

 

 

1,012,615

 

Cedarburg, WI, School District, GO UT, (Series B), Refunding Bonds, 5.375% (Original Issue Yield: 4.930%), 3/1/2015, Callable 3/1/2011 @ 100, Aaa

 

 

895,000

 

 

972,104

 

Green Bay, WI, Area Public School District, GO UT, 5.000% (Original Issue Yield: 4.740%), 4/1/2009, Aa2

 

 

2,250,000

 

 

2,470,095

 

Kenosha County, WI, (Series A), 5.000% (FGIC INS)/(Original Issue Yield: 4.500%), 3/1/2013, Callable 2/1/2010 @ 100, AAA / Aaa

 

 

1,535,000

 

 

1,637,584

 

Waukesha, WI, BANs 2.900%, 3/1/2004, NR

 

 

1,000,000

 

 

1,012,900

 

Wisconsin State, GO UT (Series C), Water Utility & Highway Improvement Bonds, 6.000%, 5/1/2014, Callable 5/1/2010 @ 100, AA / Aa3

 

 

1,750,000

 

 

2,047,903

 

 

 

 

 

 

 

11,923,869

Total Long-Term Municipals (identified cost $100,184,761)

 

 

 

 

 

106,157,454

 

 

Description

Principal
Amount

Value

Mutual Funds -- 4.2%

 

 

 

 

 

 

 

Federated Tax-Free Obligations Fund

 

 

2,559,506

 

$

2,559,506

 

Fidelity Tax Exempt Money Market Fund

 

 

2,030,739

 

 

2,030,739

Total Mutual Funds
(shares at net asset value)

 

 

 

 

 

4,590,245

Total Investments
(identified cost $104,775,006)(11)

 

 

$

110,747,699

Short-Term Income Fund

 

 

Description

Principal
Amount

Value

Asset-Backed Securities -- 9.2%

 

 

 

 

 

 

 

Citibank Credit Card Master Trust I 1998-9, Class A, 5.300%, 1/9/2006

 

$

1,220,000

 

$

1,270,727

 

(5)(8)(9)DLJ Commercial Mortgage Corp., Series
1998-ST2A, Class A1, 2.468%, 9/5/2002

 

 

231,715

 

 

231,317

 

Daimler Chrysler Auto Trust, Class A3, 6.820%, 9/6/2004

 

 

1,233,992

 

 

1,257,507

 

First Franklin Mortgage Loan Asset Backed Certificates, Series 2002-FF1, Class 1A2, 3.790%, 4/25/2032

 

 

1,600,000

 

 

1,617,454

 

Ford Credit Auto Owner Trust 2000-G, Class A4, 6.620%, 7/15/2004

 

 

684,860

 

 

700,095

 

Green Tree Home Equity Loan Trust, Series 1998-B, Class B1, 7.810%, 11/15/2029

 

 

3,000,000

 

 

3,116,199

 

Honda Auto Receivables Owner Trust, Series 2001-3, Class A4, 3.960%, 2/19/2007

 

 

1,300,000

 

 

1,334,406

 

(8)(9)Pegasus Aviation Lease Securitization, Series
1999-1A, Class A1, 6.300%, 3/25/2029

 

 

788,785

 

 

749,905

 

TMS Home Equity Trust, Series 1992-D2, Class A3, 7.550%, 1/15/2018

 

 

352,722

 

 

352,725

Total Asset-Backed Securities (identified cost $10,420,737)

 

 

 

 

 

10,630,335

Collateralized Mortgage
Obligations -- 11.1%

 

Federal Home Loan Mortgage
Corporation -- 2.9%

 

5.250%, 1/15/2010, Series 2368, Class TQ

 

 

1,620,000

 

 

1,653,281

 

5.500%, 5/15/2011, Series 2368, Class OC

 

 

1,620,000

 

 

1,680,867

 

 

 

 

 

 

 

3,334,148

 

Federal National Mortgage
Association -- 2.2%

 

6.550%, 12/25/2021, Series 1993-137, Class PH

 

$

2,430,000

 

$

2,497,537

 

Government National Mortgage
Association -- 1.9%

 

5.950%, 7/20/2024, Series
2001-5, Class PK

 

 

1,156,832

 

 

1,182,615

 

7.500%, 11/16/2027, Series 2000-12, Class AC

 

 

1,011,817

 

 

1,034,841

 

 

 

 

 

 

 

2,217,456

 

Other Financial -- 4.1%

 

 

 

 

 

 

 

(8)(9)Capital Asset Research Funding, Series 1997-A, Class A, 6.400%, 12/15/2004

 

 

456,528

 

 

456,528

 

(8)(9)Criimi Mae CMBS Corp., Series 1998-1, Class A2, 6.009%, 6/20/2030

 

 

3,240,000

 

 

3,435,286

 

Securitized Asset Sales, Inc., Series 1995-4, Class A5, 7.250%, 11/25/2025

 

 

793,100

 

 

799,473

 

 

 

 

 

 

 

4,691,287

Total Collateralized Mortgage Obligations
(identified cost $12,462,646)

 

 

 

 

 

12,740,428

Mortgage Backed-Pass Through
Securities -- 7.8%

 

Federal Home Loan Mortgage
Corporation -- 0.5%

 

9.000%, 7/1/2014

 

 

114,983

 

 

125,243

 

11.000%, 8/1/2019

 

 

404,500

 

 

458,826

 

 

 

 

 

 

 

584,069

 

Federal National Mortgage
Association -- 7.0%

 

7.000%, 12/1/2015

 

 

2,193,814

 

 

2,323,010

 

7.500%, 9/1/2015

 

 

1,910,949

 

 

2,043,644

 

8.000%, 8/1/2007

 

 

23,511

 

 

23,634

 

8.000%, 5/1/2008

 

 

439,313

 

 

462,597

 

9.000%, 7/1/2009

 

 

198,921

 

 

215,854

 

9.000%, 1/1/2015

 

 

116,607

 

 

128,753

 

9.500%, 12/1/2024

 

 

267,272

 

 

297,456

 

9.500%, 1/1/2025

 

 

475,858

 

 

529,598

 

9.500%, 1/1/2025

 

 

405,948

 

 

451,683

 

9.500%, 1/1/2025

 

 

297,731

 

 

331,355

 

10.000%, 7/1/2020

 

 

257,711

 

 

296,128

 

10.500%, 1/1/2022

 

 

213,943

 

 

246,416

 

11.000%, 12/1/2015

 

 

629,669

 

 

713,065

 

 

 

 

 

 

 

8,063,193

 

Government National Mortgage
Association -- 0.3%

 

9.000%, 12/15/2019

 

$

336,111

 

$

373,247

Total Mortgage Backed-Pass Through Securities
(identified cost $8,741,549)

 

 

 

 

 

9,020,509

 

Ford Motor Credit Co., Note, 7.500%, 6/15/2003

 

 

1,220,000

 

 

1,255,173

 

Ford Motor Credit Co., Sr. Note, 6.125%, 3/20/2004

 

 

1,620,000

 

 

1,630,940

 

General Motors Acceptance Corp., Note, 6.380%, 1/30/2004

 

 

1,620,000

 

 

1,660,377

 

General Motors Acceptance Corp., Sr. Note, 5.750%, 11/10/2003

 

 

1,220,000

 

 

1,240,816

 

 

 

 

 

 

 

5,787,306

 

Banks -- 2.2%

 

 

 

 

 

 

 

First Chicago Corp., Sub. Note, 6.875%, 6/15/2003

 

 

1,220,000

 

 

1,265,045

 

NationsBank Corp., 6.125%, 7/15/2004

 

 

1,220,000

 

 

1,294,097

 

 

 

 

 

 

 

2,559,142

 

Broker/Dealers -- 3.9%

 

 

 

 

 

 

 

Goldman Sachs Group, Inc., Bond, 7.625%, 8/17/2005

 

 

810,000

 

 

898,110

 

Merrill Lynch & Co., Inc., Note, 6.800%, 11/3/2003

 

 

810,000

 

 

849,875

 

Merrill Lynch & Co., Inc., Note, Series MTNB, 5.350%, 6/15/2004

 

 

1,050,000

 

 

1,095,188

 

Morgan Stanley, Dean Witter & Co., Unsub., 6.100%, 4/15/2006

 

 

810,000

 

 

857,342

 

PaineWebber Group, Inc., Note, 6.450%, 12/1/2003

 

 

810,000

 

 

854,028

 

 

 

 

 

 

 

4,554,543

 

Chemicals -- 1.4%

 

 

 

 

 

 

 

(8)(9)Dow Chemical Co., Note, Series 144A, 5.250%, 5/14/2004

 

 

1,620,000

 

 

1,656,166

Domestic & International
Oil -- 0.9%

 

 

 

 

Occidental Petroleum Corp., 6.500%, 4/1/2005

 

 

970,000

 

 

1,044,266

 

Electric -- 1.6%

 

 

 

 

 

 

 

(5)TXU Gas Capital, 3.210%, 10/1/2002

 

 

2,430,000

 

 

1,924,946

 

Energy -- 0.3%

 

 

 

 

 

 

 

(4)(8)(9)Osprey Trust, Sr. Secd. Note, 8.310%, 1/15/2003

 

$

2,000,000

 

$

330,000

 

Equipment -- 0.9%

 

 

 

 

 

 

 

(8)(9)Regional Jet Equipment Trust, Note, Series 144A, 7.771%, 9/5/2004

 

 

1,010,196

 

 

1,028,162

 

Federal Home Loan Mortgage
Corp. -- 2.8%

 

Federal Home Loan Mortgage Corp., Note, 7.375%, 5/15/2003

 

 

3,050,000

 

 

3,169,932

 

Financial Services -- 3.0%

 

 

 

 

 

 

 

Boeing Capital Corp., Sr. Note, 7.100%, 9/27/2005

 

 

610,000

 

 

657,390

 

Credit Suisse First Boston USA, Inc., Note, 5.875%, 8/1/2006

 

 

1,220,000

 

 

1,287,843

 

MBNA Global Capital Securities, Jr. Sub. Deb., 2.623%, 2/1/2027

 

 

1,000,000

 

 

688,467

 

Salomon Smith Barney Holdings, Inc., Note, 6.250%, 5/15/2003

 

 

810,000

 

 

833,598

 

 

 

 

 

 

 

3,467,298

 

Forest Products & Paper -- 0.5%

 

 

 

 

Reed Elsevier, Inc., Company Guarantee, 6.125%, 8/1/2006

 

 

490,000

 

 

519,111

 

Healthcare -- 1.5%

 

 

 

 

 

 

 

Abbott Laboratories, Note, 5.125%, 7/1/2004

 

 

1,620,000

 

 

1,692,011

 

Industrial Services -- 0.3%

 

 

 

 

 

 

 

Tyco International Group, Note, 5.800%, 8/1/2006

 

 

410,000

 

 

346,797

 

Insurance -- 3.8%

 

 

 

 

 

 

 

(8)(9)Allstate Financial Global, Note, 7.125%, 9/26/2005

 

 

750,000

 

 

830,935

 

HSB Group, Inc., Company Guarantee, 2.770%, 7/15/2027

 

 

2,430,000

 

 

2,290,756

 

MGIC Investment Corp., Sr. Note, 7.500%, 10/15/2005

 

 

1,095,000

 

 

1,221,579

 

 

 

 

 

 

 

4,343,270

 

Leasing -- 2.0%

 

 

 

 

 

 

 

General Electric Capital Corp., Note, 5.000%, 6/15/2007

 

$

1,000,000

 

$

1,044,945

 

General Electric Capital Corp., Note, 5.375%, 4/23/2004

 

 

1,210,000

 

 

1,265,889

 

 

 

 

 

 

 

2,310,834

 

Media -- 2.3%

 

 

 

 

 

 

 

AOL Time Warner, Inc., Note, 6.125%, 4/15/2006

 

 

810,000

 

 

750,017

 

Gannett Co., Inc., Note, 4.950%, 4/1/2005

 

 

955,000

 

 

1,001,314

 

Walt Disney Co., 7.300%, 2/8/2005

 

 

810,000

 

 

869,145

 

 

 

 

 

 

 

2,620,476

 

Metals -- 0.6%

 

 

 

 

 

 

 

Alcoa, Inc., Note, 5.875%, 6/1/2006

 

 

620,000

 

 

666,026

 

Papers -- 0.9%

 

 

 

 

 

 

 

Weyerhaeuser Co., Unsecd. Note, 5.500%, 3/15/2005

 

 

1,010,000

 

 

1,045,703

 

Real Estate -- 0.7%

 

 

 

 

 

 

 

EOP Operating LP, Sr. Note, 6.375%, 2/15/2003

 

 

810,000

 

 

823,126

 

Telecommunications -- 1.8%

 

 

 

 

British Telecommunications PLC, Note, 7.875%, 12/15/2005

 

 

570,000

 

 

624,722

 

(8)(9)France Telecommunications, Note, Series 144A, 7.200%, 3/1/2006

 

 

570,000

 

 

591,922

 

(8)(9)Verizon Global Funding, Note, Series 144A, 6.750%, 12/1/2005

 

 

810,000

 

 

831,659

 

 

 

 

 

 

 

2,048,303

 

Utilities-Electric -- 1.4%

 

 

 

 

 

 

 

(8)(9)Limestone Electronic Trust, Sr. Note, 8.625%, 3/15/2003

 

 

1,620,000

 

 

1,604,821

Total Corporate Bonds & Notes
(identified cost $44,845,746)

 

 

 

 

 

43,542,239

Government Agencies -- 31.0%

 

 

 

 

 

 

 

Federal Home Loan Bank -- 4.5%

 

 

 

 

Federal Home Loan Bank, Bond, 4.125%, 1/14/2005

 

 

5,000,000

 

 

5,192,160

 

Federal Home Loan Mortgage
Corporation -- 11.7%

 

Federal Home Loan Mortgage Corp., Note, 5.250%, 2/15/2004

 

$

5,000,000

 

$

5,231,490

 

Federal Home Loan Mortgage Corp., Unsecd. Note, 3.250%, 11/15/2004

 

 

5,000,000

 

 

5,097,570

 

Federal Home Loan Mortgage Corp., Unsecd. Note, 4.250%, 6/15/2005

 

 

3,000,000

 

 

3,122,151

 

 

 

 

 

 

 

13,451,211

 

Federal National Mortgage
Association -- 14.8%

 

Federal National Mortgage Association, Note, 3.125%, 11/15/2003

 

 

3,240,000

 

 

3,286,575

 

Federal National Mortgage Association, Note, 4.250%, 7/15/2007

 

 

4,500,000

 

 

4,645,755

 

Federal National Mortgage Association, Note, 5.125%, 2/13/2004

 

 

2,430,000

 

 

2,538,373

 

Federal National Mortgage Association, Note, 5.500%, 2/15/2006

 

 

6,000,000

 

 

6,501,318

 

 

 

 

 

 

 

16,972,021

Total Government Agencies (identified cost $34,794,799)

 

 

 

 

 

35,615,392

Notes-Variable -- 1.4%

 

 

 

 

 

 

Financial Services -- 1.4%

 

 

 

 

 

 

 

(5)(8)(9)Lehman Brothers Holdings, Inc., 2.197%, 9/3/2002 (identified cost $1,584,240)

 

 

1,600,000

 

 

1,600,000

Total Investments in Securities (identified cost $112,849,717)

 

 

 

 

 

113,148,903

(3)Repurchase Agreement -- 0.7%

 

 

 

 

 

Lehman Brothers, Inc., 1.800%, dated 8/30/2002, due 9/3/2002 (at amortized cost)

 

 

787,797

 

 

787,797

Total Investments
(identified cost $113,637,514)

 

 

 

 

$

113,936,700

Money Market Fund

 

Description

Principal
Amount

Value

Certificate of Deposit -- 0.7%

 

 

 

 

 

 

Foreign Banks -- 0.7%

 

 

 

 

 

 

 

Canadian Imperial Bank of Commerce, NY, 2.500%, 12/27/2002

 

$

20,000,000

 

$

19,986,901

(12)Commercial Paper -- 28.0%

 

Asset-Backed -- 10.6%

 

 

 

 

 

 

 

(8)(9)Liquid Funding Ltd., 1.750% - 1.790%, 10/10/2002 - 10/28-2002

 

 

75,000,000

 

 

74,821,296

 

(8)(9)Scaldis Capital Ltd., 1.830%,
9/12/2002 - 9/25/2002

 

 

57,002,000

 

 

56,965,138

 

(8)(9)Sigma Finance, Inc. (Guaranteed by Sigma Finance Corp.), 1.850%, 10/4/2002

 

 

35,000,000

 

 

34,940,967

 

(8)(9)Tannehill Capital Co., 1.790% - 1.825%, 9/18/2002 - 10/21/2002

 

 

75,000,000

 

 

74,892,756

 

(8)(9)World Omni Vehicle Leasing, Inc., 1.760% -1.770%, 9/10/2002 -9/17/2002

 

 

65,000,000

 

 

64,966,200

 

 

 

 

 

 

 

306,586,357

 

Electric -- 2.2%

 

 

 

 

 

 

 

(8)(9)Wisconsin Energy Corp., 1.880% - 1.900%, 9/18/2002 - 9/26/2002

 

 

64,200,000

 

 

64,126,978

 

Foreign Banks -- 2.5%

 

 

 

 

 

 

 

(8)(9)Depfa-Bank, 1.700%, 10/25/2002

 

 

40,000,000

 

 

39,898,000

 

Spintab-Swedmortgage AB, 1.810%, 10/7/2002

 

 

32,500,000

 

 

32,441,175

 

 

 

 

 

 

 

72,339,175

 

Healthcare -- 5.2%

 

 

 

 

 

 

 

Baxter International, Inc., 1.770% - 1.780%, 9/12/2002 - 10/15/2002

 

 

74,607,000

 

 

74,522,048

 

(8)(9)Wyeth, 1.880% - 1.900%, 9/5/2002 - 10/2/2002

 

 

75,000,000

 

 

74,934,380

 

 

 

 

 

 

 

149,456,428

 

Mining -- 2.3%

 

 

 

 

 

 

 

(8)(9)Rio Tinto Ltd., 1.710%, 11/7/2002 - 11/8/2002

 

 

66,301,000

 

 

66,088,041

 

Mortgage Banking -- 2.6%

 

 

 

 

 

 

 

Countrywide Home Loans, Inc., 1.820% - 1.840%, 9/4/2002 - 9/20/2002

 

 

75,000,000

 

 

74,968,139

 

Telecommunications -- 2.6%

 

 

 

 

 

(8)(9)Verizon Global Funding, 1.947%, 9/16/2002

 

 

75,000,000

 

 

74,996,592

Total Commercial Paper

 

 

 

 

 

808,561,710

Corporate Bonds -- 4.6%

 

 

 

 

 

 

 

Banks -- 0.5%

 

 

 

 

 

 

 

Wells Fargo & Co., 6.500%, 9/3/2002

 

$

13,500,000

 

$

13,502,000

 

Computer Services -- 1.0%

 

 

 

 

 

 

International Business Machines Corp., 5.800%, 9/9/2002

 

 

29,000,000

 

 

29,018,984

 

Healthcare -- 1.2%

 

 

 

 

 

 

 

(8)(9)Lilly (Eli) & Co., 4.226%, 3/22/2003

 

 

15,000,000

 

 

15,115,389

 

(8)(9)Merck & Co., Inc., 4.540%, 2/24/2003

 

 

20,000,000

 

 

20,204,198

 

 

 

 

 

 

 

35,319,587

 

Personal Credit -- 1.4%

 

 

 

 

(8)(9)BMW US Capital LLC, 4.248%, 6/7/2003

 

 

40,000,000

 

 

40,418,271

 

Telecommunications -- 0.5%

 

 

 

 

(8)(9)SBC Communications, Inc., 4.295%, 6/5/2003

 

15,000,000

 

 

15,172,347

Total Corporate Bonds

 

 

 

 

 

133,431,189

(5)Variable-Rate Notes -- 59.1%

 

 

 

Banks -- 6.9%

 

 

 

 

American Express Centurion Bank, DE, 1.760%, 9/14/2002

 

 

15,000,000

 

 

14,999,064

 

American Express Centurion Bank, DE, 1.767%, 9/12/2002

 

 

15,000,000

 

 

15,000,000

 

Bank One Corp., 1.970%, 11/14/2002

 

 

10,000,000

 

 

10,010,987

 

Bank One Corp., 1.980%, 11/15/2002

 

 

24,500,000

 

 

24,526,933

 

Bank One, Illinois, N.A., 1.967%, 9/17/2002

 

 

13,500,000

 

 

13,514,658

 

Bank One, N.A., 1.870%, 11/7/2002

 

 

10,000,000

 

 

10,004,407

 

First Union National Bank, 2.030%, 9/20/2002

 

 

45,000,000

 

 

45,023,838

 

J.P. Morgan Chase & Co., 1.935%, 10/30/2002

 

 

15,000,000

 

 

15,009,480

 

Mellon Financial Corp., 2.207%, 9/14/2002

 

 

51,100,000

 

 

51,107,358

 

 

 

 

 

 

 

199,196,725

 

Broker/Dealers -- 15.9%

 

 

 

 

 

 

 

(8)(9)Bank of America, 1.917%, 12/02/2002

 

 

75,000,000

 

 

75,000,000

 

(8)(9)Bear Stearns Cos., Inc., 1.906%, 12/5/2002

 

 

75,000,000

 

 

75,000,000

 

Credit Suisse First Boston USA, Inc., 1.847%, 9/17/2002

 

 

75,000,000

 

 

75,000,000

 

Goldman Sachs & Co., 1.850%, 9/30/2002

 

 

30,000,000

 

 

30,000,000

 

Goldman Sachs & Co., 2.047%, 9/17/2002

 

$

5,000,000

 

$

5,004,321

 

(8)(9)Goldman Sachs & Co., 2.090%, 10/3/2002

 

 

30,000,000

 

 

30,042,068

 

Goldman Sachs & Co., 2.227%, 9/17/2002

 

 

10,000,000

 

 

10,017,371

 

(8)(9)J.P. Morgan & Co., Inc., 1.830%, 10/01/2002

 

 

35,000,000

 

 

35,000,000

 

Merrill Lynch & Co., Inc., 1.827%, 9/12/2002

 

 

20,000,000

 

 

20,000,000

 

Merrill Lynch & Co., Inc., 2.010%, 10/30/2002

 

 

10,000,000

 

 

10,006,817

 

Merrill Lynch & Co., Inc., 2.012%, 11/5/2002

 

 

29,000,000

 

 

29,020,544

 

Merrill Lynch & Co., Inc., 2.092%, 11/5/2002

 

 

16,000,000

 

 

16,031,549

 

Morgan Stanley, 2.040%, 10/8/2002

 

 

48,525,000

 

 

48,585,448

 

 

 

 

 

 

 

458,708,118

 

Construction
Equipment -- 2.6%

 

 

 

 

Caterpillar Financial Services Corp., 1.940%, 10/9/2002

 

 

75,000,000

 

 

75,000,000

 

Diversified
Manufacturing -- 2.6%

 

 

 

 

(8)ABB Capital USA, 2.016%, 12/6/2002

 

 

75,000,000

 

 

75,000,000

 

Drugs -- 2.1%

 

 

 

 

 

 

 

(8)(9)Bayer Corp., 4.450%, 3/19/2003

 

 

60,000,000

 

 

60,481,525

 

Insurance -- 11.6%

 

 

 

 

 

 

 

(8)GE Life and Annuity Assurance Co., 1.930%, 10/22/2002

 

 

75,000,000

 

 

75,000,000

 

(8)(9)Jackson National Life Insurance Co., 1.800%, 11/1/2002

 

 

40,000,000

 

 

40,000,000

 

(8)(9)John Hancock, Global Funding II, 1.920%, 10/2/2002

 

 

8,000,000

 

 

8,004,284

 

(8)(9)John Hancock, Global Funding II, 2.037%, 9/16/2002

 

 

35,000,000

 

 

35,052,470

 

(8)(9)Metropolitan Life Insurance Co., 1.888%, 11/3/2002

 

 

50,000,000

 

 

50,000,000

 

(8)Monumental Life Insurance Co., 1.930%, 10/1/2002

 

 

25,000,000

 

 

25,000,000

 

(8)Monumental Life Insurance Co., 1.920%, 10/1/2002

 

 

10,000,000

 

 

10,000,000

 

(8)Monumental Life Insurance Co., 2.010%, 10/1/2002

 

 

40,000,000

 

 

40,000,000

 

(8)Travelers Insurance Co., 1.882%, 11/1/2002

 

$

50,000,000

 

$

50,000,000

 

 

 

 

 

 

 

333,056,754

 

Mortgage Banking -- 1.7%

 

 

 

 

 

 

(8)(9)Northern Rock PLC, 1.750%, 11/14/2002

 

 

50,000,000

 

 

50,000,000

 

Other Consumer Non-
Durables -- 2.5%

 

(8)(9)Unilever Capital Corp., 1.974%, 10/24/2002

 

 

71,110,000

 

 

71,128,398

 

Personal Credit -- 6.8%

 

 

 

 

 

 

 

American Express Credit Corp., 1.810%, 9/26/2002

 

 

45,000,000

 

 

45,000,000

 

(8)(9)American Honda Finance Corp., 1.830%, 10/22/2002

 

 

50,000,000

 

 

50,000,000

 

(8)(9)American Honda Finance Corp., 1.860%, 9/12/2002

 

 

25,000,000

 

 

25,000,000

 

Associates Corp. of North America, 1.940%, 9/26/2002

 

 

50,000,000

 

 

50,000,000

 

BMW US Capital LLC, 1.867%, 11/12/2002

 

 

10,000,000

 

 

9,999,541

 

Household Finance Corp., 1.890%, 9/13/2002

 

 

14,500,000

 

 

14,500,000

 

 

 

 

 

 

 

194,499,541

 

Student Loan -- 2.6%

 

 

 

 

 

 

 

USA Education, Inc., 1.937%, 9/16/2002

 

 

75,000,000

 

 

75,000,000

 

Telecommunications -- 3.8%

 

 

 

 

BellSouth
Telecommunications, Inc., 1.907%, 12/4/2002

 

 

75,000,000

 

 

75,000,000

 

SBC Communications, Inc., 1.857%, 9/16/2002

 

 

35,000,000

 

 

35,000,000

 

 

 

 

 

 

 

110,000,000

Total Variable-Rate Notes

 

 

 

 

 

1,702,071,061

 

Description

Shares or
Principal
Amount

Value

Mutual Funds -- 0.1%

 

 

 

 

 

 

 

American Select Cash Reserve Fund

 

 

1,155,801

 

$

1,155,801

 

Dreyfus Cash Management Fund

 

 

1,721,186

 

 

1,721,186

 

Goldman Sachs Financial Square Money Market Fund

 

 

1,004,029

 

 

1,004,029

Total Mutual Funds
(Shares at net asset value)

 

 

 

 

 

3,881,016

(3)Repurchase
Agreements -- 7.3%

 

 

 

 

Deutsche Bank Financial, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

$

35,000,000

 

 

35,000,000

 

First Union Capital Market, Inc., 1.940%, dated 8/30/2002, due 9/3/2002

 

 

85,000,000

 

 

85,000,000

 

Morgan Stanley Group, Inc., 1.935%, dated 8/30/2002, due 9/3/2002

 

 

65,000,000

 

 

65,000,000

 

Salomon Smith Barney, Inc., 1.925%, dated 8/30/2002, due 9/3/2002

 

 

25,000,000

 

 

25,000,000

Total Repurchase Agreements

 

 

 

 

 

210,000,000

Total Investments
(at amortized cost)

 

 

 

 

$

2,877,931,877

Notes to Portfolio of Investments

Note: The categories of investments are shown as a percentage of net assets for each Fund at August 31, 2002.

(1) Certain shares or principal amounts are temporarily on loan to unaffiliated broker-dealers.

(2) Represents the initial deposit within a margin account used to ensure the Fund is able to satisfy the obligations of its outstanding long futures contracts.

(3) The repurchase agreements are fully collateralized by U.S. government and/or agency obligations based on current market prices.

(4) Non-income producing.

(5) Current rate and next demand date shown.

(6) Securities held as collateral for dollar roll transactions.

(7) All or a portion of these securities are subject to dollar roll transactions.

(8) Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At August 31, 2002, these securities amounted to:

 

 

Amount

 

% of
Net Assets

Intermediate Bond Fund

 

$

57,827,540

 

9.1

%

Short-Term Income Fund

 

 

13,346,701

 

11.6

 

Money Market Fund

 

 

1,597,249,298

 

55.4

 

(9) Denotes a restricted security which has been deemed liquid by criteria approved by the Fund's Board of Directors.

(10) Current credit ratings are unaudited. Please refer to the Statement of Additional Information for an explanation of the credit ratings.

(11) Securities that are subject to alternative minimum tax represent 9.7% of Intermediate Tax-Free Fund's portfolio as calculated based upon total portfolio market value.

(12) Each issue shows the rate of discount at the time of purchase.

 

The following acronyms are used throughout this report:

 

 

ADR--American Depositary Receipt   IDC--Industrial Development Corporation
AMBAC--American Municipal Bond Assurance Corporation   INS--Insured
AMT--Alternative Minimum Tax   ISD--Independent School District
BANs--Bond Anticipation Notes   LIQ--Liquidity Agreement
COL--Collateralized   LT--Limited Tax
FGIC--Financial Guaranty Insurance Corporation   LOC--Letter of Credit
FNMA--Federal National Mortgage Association   MBIA--Municipal Bond Insurance Association
FRN--Floating Rate Note   MTN--Medium Term Note
FSA--Financial Security Assurance   PCA--Pollution Control Authority
GDR--Global Depositary Receipt   PCR--Pollution Control Revenue
GNMA--Government National Mortgage Association   PRF--Prerefunded
GO--General Obligation   PSFG--Permanent School Fund Guarantee
GTD--Guaranteed   Q-SBLF--Qualified State Bond Loan Fund
HFA--Housing Finance Authority   REMIC--Real Estate Mortgage Investment Conduit
HFDC--Health Facility Development Corporation   UT--Unlimited Tax
 

 

 

 

Marshall

Cost of
Investments for
Federal Tax
Purposes

Net
Unrealized
Appreciation
(Depreciation)
for Federal Tax
Purposes

  

Gross
Unrealized
Appreciation for
Federal Tax
Purposes

Gross
Unrealized
Depreciation for
Federal Tax
Purposes

Total Net Assets

Equity Income Fund

$ 327,414,210

$ 15,286,874

  

$ 46,462,689

$ 31,175,815

$ 342,871,800

Large-Cap Growth & Income Fund

254,738,891

25,453,819

  

46,887,792

21,433,973

279,924,083

Mid-Cap Value Fund

189,759,029

10,091,275

  

26,058,229

15,966,954

200,209,375

Mid-Cap Growth Fund

239,741,545

(33,791,342

 )

9,162,180

42,953,522

205,605,583

Small-Cap Growth Fund

84,270,283

(5,731,925

 )

3,744,238

9,476,163

80,153,215

International Stock Fund

318,122,116

(12,995,842

 )

22,843,714

35,839,556

301,911,626

Government Income Fund

425,492,102

16,717,891

  

18,091,425

1,373,534

381,432,627

Intermediate Bond Fund

614,820,895

15,152,310

  

22,361,094

7,208,784

635,773,110

Intermediate Tax-Free Fund

104,772,991

5,974,708

  

5,982,474

7,766

109,692,652

Short-Term Income Fund

113,780,125

156,575

  

2,901,183

2,744,608

115,143,771

Money Market Fund

2,877,931,877 *

--

  

--

--

2,881,806,262

 

August 31, 2002

Statements of Assets and Liabilities

 

    

Equity
Income
Fund

      

Large-Cap
Growth &
Income Fund

      

Mid-Cap
Value
Fund

      

Mid-Cap
Growth
Fund

 

Assets:

  

   

   

   

 

Investments in securities, at value

  

$ 334,269,607

    

$ 274,182,608

    

$ 194,711,274

    

$ 190,597,341

  

Investments in repurchase agreements

  

8,431,477

    

6,010,102

    

5,139,030

    

15,352,862

  

Short-term investments held as collateral for securities lending

  

10,101,512

    

42,415,906

    

32,645,623

    

63,891,070

  

Cash

  

16,449

    

21,290

    

1,705

    

12,120

  

Cash denominated in foreign currencies (identified cost, $906,952)

  

--

    

--

    

--

    

--

  

Income receivable

  

875,580

    

375,001

    

241,165

    

62,760

  

Receivable for investments sold

  

551,137

    

24

    

192,032

    

942,605

  

Receivable for capital stock sold

  

127,806

    

20,669

    

161,601

    

97,425

  

Total assets

  

354,373,568

    

323,025,600

    

233,092,430

    

270,956,183

  

Liabilities:

  

   

   

   

 

Payable for capital stock redeemed

  

216,879

    

413,059

    

5,250

    

42,759

  

Payable for investments purchased

  

624,634

    

--

    

--

    

1,184,122

  

Payable on collateral due to broker

  

10,101,512

    

42,415,906

    

32,645,623

    

63,891,070

  

Options written, at value (premium received $390,950)

  

205,445

    

--

    

--

    

--

  

Payable for income distribution

  

--

    

--

    

--

    

--

  

Net payable for foreign currency exchange contracts

  

--

    

--

    

--

    

--

  

Payable for dollar roll transactions

  

--

    

--

    

--

    

--

  

Accrued expenses

  

353,298

    

272,552

    

232,182

    

232,649

  

Total liabilities

  

11,501,768

    

43,101,517

    

32,883,055

    

65,350,600

  

Total Net Assets

  

$ 342,871,800

    

$ 279,924,083

    

$ 200,209,375

    

$ 205,605,583

  

Net Assets Consist of:

  

   

   

   

 

Paid-in-capital

  

330,512,179

    

297,111,440

    

192,118,289

    

312,732,693

  

Net unrealized appreciation (depreciation) on investments, options, futures contracts and foreign currency translation

  

17,905,895

    

27,377,880

    

10,482,444

    

(31,684,393

 )

Accumulated net realized gain (loss) on investments, options, futures contracts and foreign currency transactions

  

(5,949,413

 )  

(44,579,102

 )  

(2,554,591

 )  

(75,442,717

 )

Undistributed net investment income (accumulated net operating loss)

  

403,139

    

13,865

    

163,233

    

--

  

Total Net Assets

  

$ 342,871,800

    

$ 279,924,083

    

$ 200,209,375

    

$ 205,605,583

  

Net Asset Value, Offering Price and Redemption Proceeds Per Share

 

   

   

   

 

Investor Class of Shares:

  

   

   

   

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

$ 12.12

    

$ 10.59

    

$ 10.65

    

$ 9.31

  

Advisor Class of Shares:

  

   

   

   

 

Net Asset Value and Redemption proceeds Per Share

  

$ 12.12

    

$ 10.59

    

$ 10.65

    

$ 9.31

  

Offering Price Per Share

  

$ 12.86

 *  

$ 11.24

 *  

$ 11.30

 *  

$ 9.88

 *

Institutional Class of Shares:

  

   

   

   

 

Net Asset Value, Offering Price and Redemption proceeds Per Share

  

--

    

--

    

--

    

--

  

Net Assets:

  

   

   

   

 

Investor Class of Shares

  

$ 338,511,630

    

$ 274,959,630

    

$ 196,253,659

    

$ 203,009,938

  

Advisor Class of Shares

  

4,360,170

    

4,964,453

    

3,955,716

    

2,595,645

  

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Total Net Assets

  

$ 342,871,800

    

$ 279,924,083

    

$ 200,209,375

    

$ 205,605,583

  

Shares Outstanding:

  

   

   

   

 

Investor Class of Shares

  

27,926,805

    

25,959,651

    

18,430,494

    

21,796,816

  

Advisor Class of Shares

  

359,697

    

468,732

    

371,473

    

278,668

  

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Total Shares Outstanding

  

28,286,502

    

26,428,383

    

18,801,967

    

22,075,484

  

Investments, at identified cost

  

$ 324,476,280

    

$ 252,814,830

    

$ 189,367,874

    

$ 237,634,596

  

* Computation of offering price per share 100/94.25 of net asset value.
** Computation of offering price per share 100/95.25 of net asset value.
*** Computation of offering price per share 100/98.00 of net asset value.

Small-Cap
Growth
Fund

      

International
Stock
Fund

     

Government
Income
Fund

     

Intermediate
Bond
Fund

     

Intermediate
Tax-Free
Fund

     

Short-Term
Income
Fund

     

Money
Market
Fund

 

   

   

   

   

   

   

 

$ 77,303,516

    

$ 303,578,274

    

$ 383,824,117

    

$ 588,874,328

    

$ 110,747,699

    

$ 113,148,903

    

$ 2,667,931,877

  

1,234,842

    

1,548,000

    

58,385,876

    

41,098,877

    

--

    

787,797

    

210,000,000

  

22,296,042

    

57,174,918

    

69,977,628

    

104,474,716

    

--

    

--

    

--

  

12,053

    

936

    

12,837

    

14,245

    

--

    

1,772

    

--

  

--

    

906,972

    

--

    

--

    

--

    

--

    

--

  

14,578

    

711,874

    

1,500,528

    

7,758,450

    

1,163,521

    

1,104,746

    

9,521,424

  

2,278,114

    

13,500,111

    

5,110,513

    

15,298,726

    

--

    

546,116

    

--

  

421,418

    

1,096,209

    

724,345

    

160,686

    

249,728

    

--

    

14,176,295

  

103,560,563

    

378,517,294

    

519,535,844

    

757,680,028

    

112,160,948

    

115,589,334

    

2,901,629,596

  

   

   

   

   

   

   

 

554,535

    

11,171,498

    

147,809

    

374,556

    

--

    

135,531

    

15,918,438

  

420,243

    

7,865,230

    

5,097,622

    

15,303,023

    

2,103,989

    

--

    

--

  

22,296,042

    

57,174,918

    

69,977,628

    

104,474,716

    

--

    

--

    

--

  

--

    

--

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

612,295

    

1,330,594

    

297,740

    

262,092

    

2,801,647

  

--

    

10,307

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

61,976,148

    

--

    

--

    

--

    

--

  

136,528

    

383,715

    

291,715

    

424,029

    

66,567

    

47,940

    

1,103,249

  

23,407,348

    

76,605,668

    

138,103,217

    

121,906,918

    

2,468,296

    

445,563

    

19,823,334

  

$ 80,153,215

    

$ 301,911,626

    

$ 381,432,627

    

$ 635,773,110

    

$ 109,692,652

    

$ 115,143,771

    

$ 2,881,806,262

  

   

   

   

   

   

   

 

109,857,402

    

417,966,476

    

373,456,503

    

657,078,646

    

104,082,179

    

122,086,161

    

2,881,959,091

  

(1,584,883

 )  

(10,948,859

 )  

16,723,795

    

16,581,053

    

5,972,693

    

299,186

    

--

  

(28,119,304

 )  

(104,313,600

 )  

(8,741,511

 )  

(37,954,945

 )  

(362,201

 )  

(7,172,934

 )  

(152,829

 )

--

    

(792,391

 )  

(6,160

 )  

68,356

    

(19

 )  

(68,642

 )  

--

  

$ 80,153,215

    

$ 301,911,626

    

$ 381,432,627

    

$ 635,773,110

    

$ 109,692,652

    

$ 115,143,771

    

$ 2,881,806,262

  

   

   

   

   

   

   

 

   

   

   

   

   

   

 

$ 8.75

    

$ 9.31

    

$ 9.72

    

$ 9.44

    

$ 10.57

    

$ 9.42

    

$ 1.00

  

   

   

   

   

   

   

 

$ 8.75

    

$ 9.30

    

$ 9.72

    

$ 9.44

    

$ --

    

$ 9.42

    

$ 1.00

  

$ 9.28

 *  

$ 9.87

 *  

$ 10.20

 **  

$ 9.91

 **  

$ --

    

$ 9.61

 ***  

$ 1.00

  

   

   

   

   

   

   

 

--

    

$ 9.37

    

--

    

--

    

--

    

--

    

$ 1.00

  

   

   

   

   

   

   

 

$ 77,713,249

    

$ 195,496,018

    

$ 377,594,021

    

$ 631,517,880

    

$ 109,692,652

    

$ 114,319,561

    

$ 1,857,948,270

  

2,439,966

    

4,182,731

    

3,838,606

    

4,255,230

    

--

    

824,210

    

113,661,689

  

--

    

102,232,877

    

--

    

--

    

--

    

--

    

910,196,303

  

$ 80,153,215

    

$ 301,911,626

    

$ 381,432,627

    

$ 635,773,110

    

$ 109,692,652

    

$ 115,143,771

    

$ 2,881,806,262

  
                                       

   

   

   

   

   

   

 

8,879,599

    

20,997,631

    

38,832,251

    

66,889,868

    

10,377,413

    

12,130,638

    

1,858,049,903

  

278,809

    

449,573

    

394,763

    

450,698

    

--

    

87,462

    

113,674,060

  

--

    

10,909,047

    

--

    

--

    

--

    

--

    

910,235,128

  

9,158,408

    

32,356,251

    

39,227,014

    

67,340,566

    

10,377,413

    

12,218,100

    

2,881,959,091

  

$ 80,123,241

    

$ 316,107,418

    

$ 425,486,198

    

$ 613,392,152

    

$ 104,775,006

    

$ 113,637,514

    

$ 2,877,931,877

  

Year Ended August 31, 2002

Statements of Operations

 

    

 

Equity
Income
Fund

         

Large-Cap
Growth &
Income
Fund

         

Mid-Cap
Value
Fund

         

Mid-Cap
Growth
Fund

    

Investment Income:

  

   

   

   

 

Interest income

  

$ 188,214

    

$ 646,686

    

$ 412,451

    

$ 840,081

  

Dividend income

  

9,298,609

 (1)  

3,656,384

 (1)  

2,494,388

 (1)  

644,255

  

Total income

  

9,486,823

    

4,303,070

    

2,906,839

    

1,484,336

  

Expenses:

  

   

   

   

 

Investment adviser fee

  

2,872,655

    

2,639,560

    

1,566,354

    

2,175,526

  

Shareholder services fees--

  

   

   

   

 

Investor Class of Shares

  

947,168

    

867,173

    

513,748

    

717,578

  

Advisor Class of Shares

  

10,383

    

12,680

    

8,370

    

7,597

  

Administrative fees

  

376,369

    

346,844

    

208,827

    

287,817

  

Portfolio accounting fees

  

99,464

    

94,562

    

71,010

    

86,913

  

Transfer and dividend disbursing agent fees

  

139,828

    

146,270

    

139,387

    

165,751

  

Custodian fees

  

63,942

    

60,997

    

42,153

    

54,434

  

Registration fees

  

28,242

    

31,718

    

33,972

    

27,179

  

Auditing fees

  

14,711

    

14,710

    

14,710

    

14,710

  

Legal fees

  

3,454

    

3,625

    

3,509

    

3,625

  

Printing and postage

  

19,968

    

31,045

    

19,704

    

25,000

  

Directors' fees

  

7,273

    

7,273

    

7,273

    

7,273

  

Insurance premiums

  

2,404

    

2,276

    

1,504

    

2,052

  

Distribution services fees--

  

   

   

   

 

Advisor Class of Shares

  

10,383

    

12,680

    

8,370

    

7,597

  

Miscellaneous

  

10,838

    

9,632

    

8,001

    

7,967

  

Total expenses

  

4,607,082

    

4,281,045

    

2,646,892

    

3,591,019

  

Deduct--

  

   

   

   

 

Waiver of investment adviser fee

  

--

    

--

    

--

    

--

  

Waiver of shareholder services fees--

  

   

   

   

 

Investor Class of Shares

  

--

    

--

    

--

    

--

  

Advisor Class of Shares

  

(10,383

 )  

(12,680

 )  

(8,370

 )  

(7,597

 )

Total Waivers

  

(10,383

 )  

(12,680

 )  

(8,370

 )  

(7,597

 )

Net expenses

  

4,596,699

    

4,268,365

    

2,638,522

    

3,583,422

  

Net investment income (net operating loss)

  

4,890,124

    

34,705

    

268,317

    

(2,099,086

 )

Net Realized and Unrealized Gain (Loss) on Investments, Options, Futures Contracts and Foreign Currency:

  

   

   

   

 

Net realized gain (loss) on investment transactions and options (identified cost basis)

  

(1,549,327

 )  

(18,836,919

 )  

(707,386

 )  

(68,371,719

 )

Net realized gain (loss) on futures contracts (identified cost basis)

  

(3,125,998

 )  

(4,113,431

 )  

(1,778,463

 )  

(4,375,822

 )

Net realized gain (loss) on foreign currency (identified cost basis)

  

--

    

--

    

180

    

--

  

Net change in unrealized appreciation (depreciation) on investments, options, futures contracts and foreign currency translation

  

(51,947,249

 )  

(64,752,578

 )  

(11,109,533

 )  

(29,473,408

 )

Net realized and unrealized gain (loss) on investments, options, futures contracts and foreign currency

  

(56,622,574

 )  

(87,702,928

 )  

(13,595,202

 )  

(102,220,949

 )

Change in net assets resulting from operations

  

$ (51,732,450

 )  

$ (87,668,223

 )  

$ (13,326,885

 )  

$ (104,320,035

 )

(1) Net of foreign taxes withheld of $27,884, $12,762, $8,705, $4,518, and $667,670, respectively.
(2) Net of dollar roll expense of $1,327,872.

 

Small-Cap
Growth
Fund

      

International
Stock
Fund

      

Government
Income
Fund

      

Intermediate
Bond
Fund

      

Intermediate
Tax-Free
Fund

      

Short-Term
Income
Fund

      

Money
Market
Fund

 

   

   

   

   

   

   

 

$ 264,479

    

$ 268,959

    

$ 22,880,486

 (2)  

$ 36,085,098

    

$ 4,633,401

    

$ 6,379,730

    

$ 73,982,086

  

182,201

 (1)  

5,767,426

 (1)  

--

    

--

    

--

    

--

    

--

  

446,680

    

6,036,385

    

22,880,486

    

36,085,098

    

4,633,401

    

6,379,730

    

73,982,086

  

   

   

   

   

   

   

 

1,054,601

    

3,323,055

    

2,845,707

    

3,784,225

    

623,743

    

754,851

    

4,597,139

  

   

   

   

   

   

   

 

257,097

    

559,875

    

940,970

    

1,567,583

    

259,893

    

313,391

    

4,791,577

  

6,553

    

9,871

    

7,598

    

9,178

    

--

    

1,131

    

322,428

  

105,460

    

328,190

    

372,956

    

592,063

    

103,957

    

125,808

    

1,350,452

  

57,637

    

122,295

    

96,724

    

116,757

    

49,996

    

58,623

    

244,537

  

135,047

    

104,370

    

139,283

    

135,787

    

46,103

    

68,354

    

466,043

  

21,412

    

201,176

    

62,978

    

88,046

    

20,651

    

25,162

    

330,623

  

25,265

    

37,940

    

34,160

    

27,265

    

18,780

    

29,560

    

99,751

  

14,710

    

16,526

    

14,710

    

14,710

    

14,710

    

14,710

    

14,710

  

3,564

    

2,214

    

3,509

    

3,509

    

3,142

    

3,509

    

4,256

  

19,726

    

37,676

    

20,899

    

16,012

    

6,542

    

12,968

    

65,768

  

7,273

    

7,273

    

7,273

    

7,273

    

7,273

    

7,273

    

7,273

  

1,240

    

2,122

    

2,343

    

3,350

    

1,264

    

1,359

    

11,704

  

   

   

   

   

   

   

 

6,553

    

9,871

    

7,598

    

9,178

    

--

    

1,131

    

386,913

  

5,140

    

8,036

    

10,762

    

16,803

    

4,835

    

5,124

    

35,478

  

1,721,278

    

4,770,490

    

4,567,470

    

6,391,739

    

1,160,889

    

1,422,954

    

12,728,652

  

   

   

   

   

   

   

 

--

    

(70,000

 )  

(379,428

 )  

(378,422

 )  

(280,684

 )  

(427,749

 )  

(1,098,213

 )

   

   

   

   

   

   

 

--

    

--

    

(865,693

 )  

(1,442,176

 )  

(239,101

 )  

(288,320

 )  

--

  

(6,553

 )  

(9,871

 )  

(7,598

 )  

(9,178

 )  

--

    

(1,131

 )  

--

  

(6,553

 )  

(79,871

 )  

(1,252,719

 )  

(1,829,776

 )  

(519,785

 )  

(717,200

 )  

(1,098,213

 )

1,714,725

    

4,690,619

    

3,314,751

    

4,561,963

    

641,104

    

705,754

    

11,630,439

  

(1,268,045

 )  

1,345,766

 )  

19,565,735

    

31,523,135

    

3,992,297

    

5,673,976

    

62,351,647

  

   

   

   

   

   

   

 

(25,427,634

 )  

(59,392,247

 )  

512,709

    

(8,520,585

 )  

809,860

    

47,525

    

(7,007

 )

683,880

    

--

    

--

    

--

    

--

    

--

    

--

  

656

    

(882,998

 )  

--

    

--

    

--

    

--

    

--

  

(6,435,693

 )  

12,302,179

 )  

7,386,534

    

6,202,161

    

1,540,384

    

(1,316,104

 )  

--

  

(31,178,791

 )  

(47,973,066

 )  

7,899,243

    

(2,318,424

 )  

2,350,244

    

(1,268,579

 )  

(7,007

 )

$ (32,446,836

 )  

$ (46,627,300

 )  

$ 27,464,978

    

$ 29,204,711

    

$ 6,342,541

    

$ 4,405,397

    

$ 62,344,640

  

Statements of Changes in Net Assets

 

 

Equity
Income
Fund    
     Large-Cap
Growth &
Income Fund

 

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

Increase (Decrease) in Net Assets

  

   

   

   

 

Operations--

  

   

   

   

 

Net investment income (net operating loss)

  

$ 4,890,124

    

$ 4,601,248

    

$ 34,705

    

$ 150,608

  

Net realized gain (loss) on investments and options transactions

  

(1,549,327

 )  

19,832,156

    

(18,836,919

 )  

(17,367,829

 )

Net realized gain (loss) on futures contracts

  

(3,125,998

 )  

(3,441,318

 )  

(4,113,431

 )  

(1,892,744

 )

Net realized gain (loss) on foreign currency

  

--

    

--

    

--

    

--

  

Net change in unrealized appreciation (depreciation) of investments, options, futures contracts and foreign currency translation

  

(51,947,249

 )  

(11,491,423

 )  

(64,752,578

 )  

(108,663,462

 )

Change in net assets resulting from operations

  

(51,732,450

 )  

9,500,663

    

(87,668,223

 )  

(127,773,427

 )

Distributions to Shareholders--

  

   

   

   

 

Distributions to shareholders from net investment income

  

   

   

   

 

Investor Class of Shares

  

(5,044,081

 )  

(4,113,180

 )  

(164,935

 )  

(387,709

 )

Advisor Class of Shares

  

(53,945

 )  

(25,729

 )  

(2,195

 )  

(3,696

 )

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Distributions to shareholders from net realized gain on investments

  

   

   

   

 

Investor Class of Shares

  

(14,838,709

 )  

(2,914,298

 )  

--

    

(21,253,461

 )

Advisor Class of Shares

  

(144,767

 )  

(17,420

 )  

--

    

(199,698

 )

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Change in net assets resulting from distributions to shareholders

  

(20,081,502

 )  

(7,070,627

 )  

(167,130

 )  

(21,844,564

 )

Capital Stock Transactions--

  

   

   

   

 

Proceeds from sale of shares

  

54,966,324

    

58,546,071

    

46,470,452

    

61,140,401

  

Net asset value of shares issued to shareholders in payment of distributions declared

  

17,657,653

    

4,633,964

    

107,936

    

21,325,052

  

Cost of shares redeemed

  

(76,217,323

 )  

(73,256,581

 )  

(70,501,282

 )  

(54,975,248

 )

Change in net assets resulting from capital stock transactions

  

(3,593,346

 )  

(10,076,546

 )  

(23,922,894

 )  

27,490,205

  

Change in net assets

  

(75,407,298

 )  

(7,646,510

 )  

(111,758,247

 )  

(122,127,786

 )

Net Assets:

  

   

   

   

 

Beginning of period

  

418,279,098

    

425,925,608

    

391,682,330

    

513,810,116

  

End of period

  

$ 342,871,800

    

$ 418,279,098

    

$ 279,924,083

    

$ 391,682,330

  

Undistributed net investment income (accumulated net operating loss) included in net assets at end of period

  

$ 403,139

    

$ 611,041

    

$ 13,865

    

$ 146,290

  

Mid-Cap
Value Fund

    

Mid-Cap
Growth Fund

    

Small-Cap
Growth Fund

    

International
Stock Fund

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

      

   

   

   

   

   

   

 

   

   

   

   

   

   

   

 

$ 268,317

    

$ 211,412

    

$ (2,099,086

 )     

$ (1,556,489

 )  

$ (1,268,045

 )  

$ (686,789

 )  

$ 1,345,766

    

$ 1,453,548

  

(707,386

 )  

24,875,839

    

(68,371,719

 )  

7,534,050

    

(25,427,634

 )  

10,664,839

    

(59,392,247

 )  

(43,502,687

 )

(1,778,463

 )  

(1,089,843

 )  

(4,375,822

 )  

(1,534,067

 )  

683,880

 )  

(4,176,868

 )  

--

 )  

--

  

180

    

--

    

--

    

--

    

656

    

--

    

(882,998

 )  

(1,316,950

 )

(11,109,533

 )  

3,878,691

    

(29,473,408

 )  

(188,928,073

 )  

(6,435,693

 )  

(46,191,525

 )  

12,302,179

    

(88,132,643

 )

(13,326,885

 )  

27,876,099

    

(104,320,035

 )  

(184,484,579

 )  

(32,446,836

 )  

(40,390,343

 )  

(46,627,300

 )  

(131,498,732

 )

   

   

   

   

   

   

   

 

   

   

   

   

   

   

   

 

(146,095

 )  

(668,603

 )  

--

    

--

    

--

    

--

    

--

    

--

  

(2,090

 )  

(7,436

 )  

--

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

--

    

--

    

--

    

--

    

--

    

--

  

   

   

   

   

   

   

   

 

(22,874,085

 )  

(6,653,072

 )  

(876,922

 )  

(97,066,185

 )  

(4,821,728

 )  

(13,280,301

 )  

--

    

(33,371,017

 )

(351,861

 )  

(74,513

 )  

(8,848

 )  

(663,495

 )  

(116,211

 )  

(201,636

 )  

--

    

(390,149

 )

--

    

--

    

--

    

--

    

--

    

--

    

--

    

(15,060,189

 )

(23,374,131

 )  

(7,403,624

 )  

(885,770

 )  

(97,729,680

 )  

(4,937,939

 )  

(13,481,937

 )  

--

    

(48,821,355

 )

   

   

   

   

   

   

   

 

103,913,966

    

75,859,768

    

56,376,558

    

75,745,858

    

41,122,184

    

42,699,451

    

218,685,271

    

247,575,054

  

22,643,913

    

7,061,197

    

877,762

    

96,392,588

    

4,871,257

    

13,289,856

    

--

    

47,791,410

  

(64,654,487

 )  

(36,009,370

 )  

(83,212,079

 )  

(97,686,196

 )  

(36,251,186

 )  

(55,428,320

 )  

(229,717,274

 )  

(243,821,846

 )

61,903,392

    

46,911,595

    

(25,957,759

 )  

74,452,250

    

9,742,255

    

560,987

    

(11,032,003

 )  

51,544,618

  

25,202,376

    

67,384,070

    

(131,163,564

 )  

(207,762,009

 )  

(27,642,520

 )     

(53,311,293

 )  

(57,659,303

 )     

(128,775,469

  

   

   

   

   

   

   

   

 

175,006,999

    

107,622,929

    

336,769,147

    

544,531,156

    

107,795,735

    

161,107,028

    

359,570,929

    

488,346,398

  

$ 200,209,375

    

$ 175,006,999

    

$ 205,605,583

    

$ 336,769,147

    

$ 80,153,215

    

$ 107,795,735

    

$ 301,911,626

    

$ 359,570,929

  

$ 163,233

    

$ 42,921

    

$ --

    

$ --

    

$ --

    

$ --

    

$ (792,391

 )  

$ (3,039,914

 )

Statements of Changes in Net Assets

 
     Government
Income
Fund		     

Intermediate
Bond
Fund

 

 

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

Increase (Decrease) in Net Assets

  

   

   

   

 

Operations--

  

   

   

   

 

Net investment income (net operating loss)

  

$ 19,565,735

    

$ 22,684,729

    

$ 31,523,135

    

$ 37,399,343

  

Net realized gain (loss) on investment and options transactions

  

512,709

    

4,584,409

    

(8,520,585

 )  

1,466,569

  

Net realized gain (loss) on futures contracts

  

--

    

--

    

--

    

--

  

Net realized gain (loss) on foreign currency

  

--

    

--

    

--

    

--

  

Net change in unrealized appreciation (depreciation) of investments, options, futures contracts and foreign currency translation

  

7,386,534

    

8,754,436

    

6,202,161

    

22,426,317

  

Change in net assets resulting from operations

  

27,464,978

    

36,023,574

    

29,204,711

    

61,292,229

  

Distributions to Shareholders--

  

   

   

   

 

Distributions to shareholders from net investment income

  

   

   

   

 

Investor Class of Shares

  

(19,870,618

 )  

(22,613,781

 )  

(33,505,994

 )  

(37,280,833

 )

Advisor Class of Shares

  

(152,957

 )  

(110,393

 )  

(187,339

 )  

(143,096

 )

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Distributions to shareholders from net realized gain on investments

  

   

   

   

 

Investor Class of Shares

  

--

    

--

    

--

    

--

  

Advisor Class of Shares

  

--

    

--

    

--

    

--

  

Institutional Class of Shares

  

--

    

--

    

--

    

--

  

Change in net assets resulting from distributions to shareholders

  

(20,023,575

 )  

(22,724,174

 )  

(33,693,333

 )  

(37,423,929

 )

Capital Stock Transactions--

  

   

   

   

 

Proceeds from sale of shares

  

95,178,601

    

65,432,184

    

161,234,207

    

161,319,013

  

Net asset value of shares issued to shareholders in payment of distributions declared

  

12,326,453

    

14,045,043

    

16,654,681

    

17,371,080

  

Cost of shares redeemed

  

(116,273,076

 )  

(68,738,231

 )  

(181,719,809

 )  

(173,414,101

 )

Change in net assets resulting from capital stock transactions

  

(8,768,022

 )  

10,738,996

    

(3,830,921

 )  

5,275,992

  

Change in net assets

  

(1,326,619

 )  

24,038,396

    

(8,319,543

 )  

29,144,292

  

Net Assets:

  

   

   

   

 

Beginning of period

  

382,759,246

    

358,720,850

    

644,092,653

    

614,948,361

  

End of period

  

$ 381,432,627

    

$ 382,759,246

    

$ 635,773,110

    

$ 644,092,653

  

 

 

   

   

   

 

Undistributed net investment income (accumulated net operating loss) included in net assets at end of period

  

$ (6,160

 )  

$ 265

    

$ 68,356

    

$ 4,469

  

 

Intermediate
Tax-Free
Fund

 

    Short-Term
Income
Fund    		     

Money
Market
Fund

Year Ended
August 31,
2002

       

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

    

Year Ended
August 31,
2002

    

Year Ended
August 31,
2001

  

   

   

   

   

   

 

   

   

   

   

   

 

$ 3,992,297

    

$ 4,064,375

    

$ 5,673,976

    

$ 7,632,931

    

$ 62,351,647

    

$ 128,213,532

  

809,860

    

638,957

    

47,525

    

(937,731

 )  

(7,007

 )  

(145,822

 )

--

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

--

    

--

    

--

    

--

  

1,540,384

    

3,255,563

    

(1,316,104

 )  

5,233,523

    

--

    

--

  

6,342,541

    

7,958,895

    

4,405,397

    

11,928,723

    

62,344,640

    

128,067,710

  

   

   

   

   

   

 

   

   

   

   

   

 

(3,989,466

 )  

(4,064,724

 )  

(6,239,624

 )  

(7,653,555

 )  

(37,389,606

 )  

(92,313,480

 )

--

    

--

    

(21,027

 )  

(3,006

 )  

(2,174,238

 )  

(6,001,217

 )

--

    

--

    

--

    

--

    

(22,787,803

 )  

(29,898,835

 )

   

   

   

   

   

 

--

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

--

    

--

    

--

    

--

  

--

    

--

    

--

    

--

    

--

    

--

  

(3,989,466

 )  

(4,064,724

 )  

(6,260,651

 )  

(7,656,561

 )  

(62,351,647

 )  

(128,213,532

 )

   

   

   

   

   

 

23,476,092

    

18,030,777

    

52,784,668

    

42,309,425

    

10,014,120,035

    

9,007,684,945

  

396,321

    

379,104

    

3,343,293

    

4,317,480

    

16,309,836

    

30,419,965

  

(18,832,499

 )  

(15,558,697

 )  

(65,233,789

 )  

(47,297,424

 )  

(9,888,216,033

 )  

(8,357,725,162

 )

5,039,914

    

2,851,184

    

(9,105,828

 )  

(670,519

 )  

142,213,838

    

680,379,748

  

7,392,989

    

6,745,355

    

(10,961,082

 )  

3,601,643

    

142,206,831

    

680,233,926

  

   

   

   

   

   

 

102,299,663

    

95,554,308

    

126,104,853

    

122,503,210

    

2,739,599,431

    

2,059,365,505

  

$ 109,692,652

    

$ 102,299,663

    

$ 115,143,771

    

$ 126,104,853

    

$ 2,881,806,262

    

$ 2,739,599,431

  

 

   

 

   

 

   

 

   

 

   

 

 

$ (19

 )  

$ (404

 )  

$ (68,642

 )  

$ (18

 )  

$ --

    

$ --

  

For the Year Ended August 31, 2002

Statement of Cash Flows
 
    

Government
Income
Fund

 

Increase (Decrease) in Cash

  

 

 

Cash Flows From Operating Activities:

  

 

Net increase in net assets from operations

  

$ 27,464,978

  

Adjustments to reconcile change in net assets resulting from
operations to net cash used in operating activities:

  

 

Purchases of investment securities

  

(1,039,344,912

 )

Paydown on investment securities

  

99,660,270

  

Realized loss on paydowns

  

516,736

  

Proceeds from sale of investment securities

  

977,485,508

  

Net purchase of short-term investment securities

  

(20,189,805

 )

Decrease in income receivable

  

213,556

  

Decrease in cash held as collateral for securities lending

  

71,700,395

  

Decrease in accrued expenses

  

(17,126

 )

Increase in receivable for investments sold

  

(5,110,513

 )

Increase in payable for investments purchased

  

5,097,622

  

Decrease in payable on collateral due to broker

  

(71,700,395

 )

Net realized gain on investments

  

(512,709

 )

Net amorized/accretion of premium/discount

  

(54,691

 )

Net change in unrealized appreciation on investments

  

(7,386,534

 )

NET CASH PROVIDED BY OPERATING ACTIVITIES

  

37,822,380

  

Cash flow from Financing Activities:

  

 

Cash received from dollar roll transactions, net

  

(8,331,180

 )

Proceeds from sale of shares

  

94,637,480

  

Cash distributions paid

  

(7,815,446

 )

Payment for shares redeemed

  

(116,300,397

 )

NET CASH USED IN FINANCING ACTIVITIES

  

(37,809,543

 )

NET INCREASE IN CASH

  

12,837

  

Cash:

  

 

Beginning of the year

  

--

  

End of the year

  

$ 12,837

  

Financial Highlights -- Investor Class of Shares
(For a share outstanding throughout each period)

     

Year
Ended
August 31,

     

Net asset
value,
beginning
of period

     

Net
investment
income
(net
operating
loss)

     

Net realized and
unrealized
gain (loss) on
investments,
options, futures
contracts and
foreign currency

     

Total from
investment
operations

     

Distributions to
shareholders
from net
investment
income

     

Distributions to
shareholders from
net realized gain
on investments,
options, futures
contracts and
foreign currency

     

Total
distributions

     

Net asset
value, end
of period

     

Total
return(1)

     

Ratios to Average Net Assets

     

Net assets,
end of
period
(000 omitted)

     

Portfolio
turnover
rate

Expenses

     

Net
investment
income
(net operating
loss)

     

Expense
waiver(2)

Equity Income Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$15.64

  

0.31

  

(0.19)(3)

  

0.12

  

(0.32)

  

(1.27)

  

(1.59)

  

$14.17

  

0.04%

  

1.17%

  

2.01%

  

--

  

$458,865

  

69%

1999

  

$14.17

  

0.28

  

3.59

  

3.87

  

(0.29)

  

(1.04)

  

(1.33)

  

$16.71

  

27.92%

  

1.17%

  

1.73%

  

--

  

$537,295

  

72%

2000

  

$16.71

  

0.23

  

(0.73)

  

(0.50)

  

(0.23)

  

(1.36)

  

(1.59)

  

$14.62

  

(2.80)%

  

1.16%

  

1.54%

  

--

  

$423,845

  

98%

2001

  

$14.62

  

0.16

  

0.16

  

0.32

  

(0.14)

  

(0.10)

  

(0.24)

  

$14.70

  

2.20%

  

1.19%

  

1.07%

  

--

  

$414,651

  

78%

2002

  

$14.70

  

0.14

  

(1.99)

  

(1.85)

  

(0.18)

  

(0.55)

  

(0.73)

  

$12.12

  

(13.16)%

  

1.20%

  

1.28%

  

--

  

$338,512

  

50%

Large-Cap Growth & Income Fund

  

 

 

 

 

 

 

 

 

 

 

1998

  

$13.96

  

0.06

  

0.46

  

0.52

  

(0.06)

  

(1.18)

  

(1.24)

  

$13.24

  

3.44%

  

1.21%

  

0.40%

  

--

  

$274,821

  

33%

1999

  

$13.24

  

0.06

  

5.01

  

5.07

  

(0.06)

  

(0.77)

  

(0.83)

  

$17.48

  

38.98%

  

1.20%

  

0.32%

  

--

  

$407,031

  

32%

2000

  

$17.48

  

0.03

  

2.72

  

2.75

  

(0.02)

  

(0.99)

  

(1.01)

  

$19.22

  

16.35%

  

1.18%

  

0.16%

  

--

  

$510,195

  

71%

2001

  

$19.22

  

0.01

  

(4.66)

  

(4.65)

  

(0.01)

  

(0.81)

  

(0.82)

  

$13.75

  

(24.79)%

  

1.19%

  

0.03%

  

--

  

$386,911

  

63%

2002

  

$13.75

  

0.01

  

(3.16)

  

(3.15)

  

(0.01)

  

--

  

(0.01)

  

$10.59

  

(22.94)%

  

1.21%

  

0.01%

  

--

  

$274,960

  

62%

Mid-Cap Value Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$13.14

  

0.10

  

(0.92)

  

(0.82)

  

(0.12)

  

(1.95)

  

(2.07)

  

$10.25

  

(7.75)%

  

1.25%

  

0.96%

  

--

  

$134,620

  

59%

1999

  

$10.25

  

0.11

  

2.10

  

2.21

  

(0.12)

  

(0.94)

  

(1.06)

  

$11.40

  

21.92%

  

1.25%

  

0.96%

  

--

  

$128,575

  

90%

2000

  

$11.40

  

0.09

  

0.79

  

0.88

  

(0.05)

  

(1.38)

  

(1.43)

  

$10.85

  

9.29%

  

1.33%

  

0.86%

  

--

  

$106,569

  

94%

2001

  

$10.85

  

0.02

  

2.62

  

2.64

  

(0.07)

  

(0.70)

  

(0.77)

  

$12.72

  

25.80%

  

1.30%

  

0.16%

  

--

  

$172,719

  

104%

2002

  

$12.72

  

0.02

  

(0.40)

  

(0.38)

  

(0.01)

  

(1.68)

  

(1.69)

  

$10.65

  

(4.25)%

  

1.26%

  

0.13%

  

--

  

$196,254

  

44%

Mid-Cap Growth Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$14.82

  

(0.13)

  

(0.93)

  

(1.06)

  

--

  

(1.81)

  

(1.81)

  

$11.95

  

(8.77)%

  

1.23%

  

(0.79)%

  

--

  

$187,388

  

167%

1999

  

$11.95

  

(0.11)

  

6.26

  

6.15

  

--

  

(0.82)

  

(0.82)

  

$17.28

  

53.41%

  

1.21%

  

(0.73)%

  

--

  

$297,249

  

173%

2000

  

$17.28

  

(0.16)(4)

  

12.00

  

11.84

  

--

  

(1.69)

  

(1.69)

  

$27.43

  

71.91%

  

1.18%

  

(0.66)%

  

--

  

$541,805

  

108%

2001

  

$27.43

  

(0.06)(4)

  

(8.67)

  

(8.73)

  

--

  

(4.97)

  

(4.97)

  

$13.73

  

(34.17)%

  

1.19%

  

(0.39)%

  

--

  

$333,718

  

118%

2002

  

$13.73

  

(0.09)(4)

  

(4.29)

  

(4.38)

  

--

  

(0.04)

  

(0.04)

  

$9.31

  

(32.01)%

  

1.24%

  

(0.72)%

  

--

  

$203,010

  

167%

Small-Cap Growth Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$12.19

  

(0.22)

  

(1.66)

  

(1.88)

  

--

  

(0.49)

  

(0.49)

  

$9.82

  

(16.25)%

  

1.60%

  

(1.18)%

  

--

  

$79,858

  

139%

1999

  

$9.82

  

(0.11)

  

2.69

  

2.58

  

--

  

(0.02)

  

(0.02)

  

$12.38

  

26.30%

  

1.59%

  

(0.90)%

  

--

  

$102,992

  

219%

2000

  

$12.38

  

(0.18)(4)

  

7.03

  

6.85

  

--

  

(0.41)

  

(0.41)

  

$18.82

  

56.14%

  

1.59%

  

(1.03)%

  

--

  

$159,336

  

105%

2001

  

$18.82

  

(0.08)(4)

  

(4.52)

  

(4.60)

  

--

  

(1.63)

  

(1.63)

  

$12.59

  

(24.23)%

  

1.58%

  

(0.62)%

  

--

  

$105,397

  

287%

2002

  

$12.59

  

(0.14)(4)

  

(3.12)

  

(3.26)

  

--

  

(0.58)

  

(0.58)

  

$8.75

  

(27.23)%

  

1.63%

  

(1.20)%

  

--

  

$77,713

  

292%

International Stock Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$13.20

  

0.26

  

(1.42)

  

(1.16)

  

(0.21)

  

(0.29)

  

(0.50)

  

$11.54

  

(9.09)%

  

1.49%

  

2.01%

  

--

  

$225,248

  

24%

1999

  

$11.54

  

0.09

  

2.45

  

2.54

  

(0.25)

  

--

  

(0.25)

  

$13.83

  

22.20%

  

1.51%

  

0.79%

  

0.01%

  

$270,315

  

182%

2000

  

$13.83

  

(0.07)(4)

  

4.09

  

4.02

  

(0.16)

  

(1.36)

  

(1.52)

  

$16.33

  

28.09%

  

1.50%

  

(0.40)%

  

0.02%

  

$351,242

  

225%

2001

  

$16.33

  

0.03(4)

  

(4.02)

  

(3.99)

  

--

  

(1.61)

  

(1.61)

  

$10.73

  

(26.36)%

  

1.46%

  

0.25%

  

0.02%

  

$246,649

  

156%

2002

  

$10.73

  

0.03(4)

  

(1.45)

  

(1.42)

  

--

  

--

  

--

  

$9.31

  

(13.23)%

  

1.49%

  

0.32%

  

0.02%

  

$195,496

  

83%

Government Income Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$9.49

  

0.61

  

0.21

  

0.82

  

(0.61)

  

--

  

(0.61)

  

$9.70

  

8.92%

  

0.87%

  

6.38%

  

0.34%

  

$280,313

  

353%

1999

  

$9.70

  

0.54

  

(0.48)

  

0.06

  

(0.54)

  

--

  

(0.54)

  

$9.22

  

0.62%

  

0.86%

  

5.69%

  

0.33%

  

$317,284

  

232%

2000

  

$9.22

  

0.57

  

(0.02)

  

0.55

  

(0.57)

  

--

  

(0.57)

  

$9.20

  

6.20%

  

0.85%

  

6.28%

  

0.33%

  

$357,229

  

192%

2001

  

$9.20

  

0.57

  

0.33

  

0.90

  

(0.57)

  

--

  

(0.57)

  

$9.53

  

10.02%

  

0.87%

  

6.04%

  

0.33%

  

$380,308

  

122%

2002

  

$9.53

  

0.49(4)(5)

  

0.20(5)

  

0.69

  

(0.50)

  

--

  

(0.50)

  

$9.72

  

7.50%

  

0.87%

  

5.16%(5)

  

0.33%

  

$377,594

  

76%

Intermediate Bond Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$9.44

  

0.58

  

0.16

  

0.74

  

(0.58)

  

--

  

(0.58)

  

$9.60

  

8.00%

  

0.71%

  

6.02%

  

0.29%

  

$589,669

  

148%

1999

  

$9.60

  

0.55

  

(0.43)

  

0.12

  

(0.55)

  

--

  

(0.55)

  

$9.17

  

1.28%

  

0.71%

  

5.85%

  

0.28%

  

$598,970

  

181%

2000

  

$9.17

  

0.57

  

(0.01)

  

0.56

  

(0.57)

  

--

  

(0.57)

  

$9.16

  

6.35%

  

0.70%

  

6.31%

  

0.29%

  

$612,980

  

243%

2001

  

$9.16

  

0.55

  

0.35

  

0.90

  

(0.55)

  

--

  

(0.55)

  

$9.51

  

10.14%

  

0.72%

  

5.93%

  

0.29%

  

$640,863

  

273%

2002

  

$9.51

  

0.47(4)(5)

  

(0.04)(5)

  

0.43

  

(0.50)

  

--

  

(0.50)

  

$9.44

  

4.70%

  

0.72%

  

5.00%(5)

  

0.29%

  

$631,518

  

187%

Intermediate Tax-Free Fund

  

 

 

 

 

 

 

 

 

 

 

1998

  

$10.04

  

0.43

  

0.29

  

0.72

  

(0.43)

  

--

  

(0.43)

  

$10.33

  

7.31%

  

0.61%

  

4.22%

  

0.51%

  

$101,592

  

68%

1999

  

$10.33

  

0.42

  

(0.41)

  

0.01

  

(0.42)

  

(0.07)

  

(0.49)

  

$9.85

  

0.02%

  

0.61%

  

4.11%

  

0.48%

  

$108,732

  

53%

2000

  

$9.85

  

0.43

  

0.10

  

0.53

  

(0.43)

  

--

  

(0.43)

  

$9.95

  

5.58%

  

0.60%

  

4.43%

  

0.49%

  

$95,554

  

71%

2001

  

$9.95

  

0.43

  

0.40

  

0.83

  

(0.43)

  

--

  

(0.43)

  

$10.35

  

8.52%

  

0.62%

  

4.24%

  

0.50%

  

$102,300

  

51%

2002

  

$10.35

  

0.40(5)

  

0.22(5)

  

0.62

  

(0.40)

  

--

  

(0.40)

  

$10.57

  

6.12%

  

0.62%

  

3.84%(5)

  

0.50%

  

$109,693

  

27%

Short-Term Income Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$9.64

  

0.61

  

(0.03)

  

0.58

  

(0.61)

  

--

  

(0.61)

  

$9.61

  

6.22%

  

0.50%

  

6.40%

  

0.55%

  

$133,186

  

90%

1999

  

$9.61

  

0.55

  

(0.21)

  

0.34

  

(0.55)

  

--

  

(0.55)

  

$9.40

  

3.59%

  

0.51%

  

5.74%

  

0.56%

  

$134,943

  

163%

2000

  

$9.40

  

0.60

  

(0.19)

  

0.41

  

(0.60)

  

--

  

(0.60)

  

$9.21

  

4.46%

  

0.50%

  

6.43%

  

0.57%

  

$122,503

  

72%

2001

  

$9.21

  

0.58

  

0.33

  

0.91

  

(0.58)

  

--

  

(0.58)

  

$9.54

  

10.16%

  

0.53%

  

6.16%

  

0.57%

  

$126,008

  

79%

2002

  

$9.54

  

0.42(4)(5)

  

(0.07)(5)

  

0.35

  

(0.47)

  

--

  

(0.47)

  

$9.42

  

3.77%

  

0.56%

  

4.51%(5)

  

0.57%

  

$114,320

  

54%

Money Market Fund

  

 

 

 

 

 

 

 

 

 

 

 

1998

  

$1.00

  

0.05

  

--

  

0.05

  

(0.05)

  

--

  

(0.05)

  

$1.00

  

5.51%

  

0.41%

  

5.37%

  

0.25%

  

$1,588,817

  

--

1999

  

$1.00

  

0.05

  

--

  

0.05

  

(0.05)

  

--

  

(0.05)

  

$1.00

  

4.98%

  

0.41%

  

4.86%

  

0.25%

  

$1,663,740

  

--

2000

  

$1.00

  

0.06

  

--

  

0.06

  

(0.06)

  

--

  

(0.06)

  

$1.00

  

5.88%

  

0.44%

  

5.73%

  

0.16%

  

$1,776,669

  

--

2001

  

$1.00

  

0.05

  

--

  

0.05

  

(0.05)

  

--

  

(0.05)

  

$1.00

  

5.32%

  

0.46%

  

5.22%

  

0.05%

  

$1,697,200

  

--

2002

  

$1.00

  

0.02

  

--

  

0.02

  

(0.02)

  

--

  

(0.02)

  

$1.00

  

1.99%

  

0.45%

  

1.95%

  

0.04%

  

$1,857,948

  

--

(1) Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
(2) This voluntary expense decrease is reflected in both the expense and net investment income (net operating loss) ratios shown.
(3) The amount shown in this caption for a share outstanding does not correspond with the aggregate net realized and unrealized gain (loss) on investments, options, futures contracts and foreign currency for the period ended due to the timing of sales and repurchases of Fund shares in relation to fluctuating market values of the investments of the Fund.
(4) Per share information is based on average shares outstanding.
(5) Effective September 1, 2001, the Government Income Fund, Intermediate Bond Fund, Intermediate Tax-Free Fund and Short-Term Income Fund adopted the provisions of the American Institute of Certified Public Accountants ("AICPA") Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended August 31, 2002 was as follows:

 

    

Net Investment
Income per Share

     

Net Realized/Unrealized Gain/
Loss per Share

     

Ratio of Net Investment Income
to Average Net Assets

Increase (Decrease)

  

 

 

Government Income Fund

  

$(0.01)

  

$ 0.01

  

(0.12)%

Intermediate Bond Fund

  

(0.03)

  

0.03

  

(0.32)

Intermediate Tax-Free Fund

  

0.00

  

(0.00)

  

0.00

Short-Term Income Fund

  

(0.04)

  

0.04

  

(0.40)

Per share, ratios and supplemental data for periods prior to September 1, 2001 have not been restated to reflect this change in presentation.

Notes to Financial Statements

1. Organization

Marshall Funds, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, management investment company. The Corporation consists of eleven diversified portfolios (individually referred to as the "Fund", or collectively as the "Funds"), all of which are presented herein:

Portfolio Name

     

Investment Objective

Marshall Equity Income Fund ("Equity Income Fund")

  

To provide capital appreciation and above-average dividend income.

Marshall Large-Cap Growth & Income Fund
("Large-Cap Growth & Income Fund")

  

To provide capital appreciation and income.

Marshall Mid-Cap Value Fund ("Mid-Cap Value Fund")

  

To provide capital appreciation.

Marshall Mid-Cap Growth Fund ("Mid-Cap Growth Fund")

  

To provide capital appreciation.

Marshall Small-Cap Growth Fund ("Small-Cap Growth Fund")

  

To provide capital appreciation.

Marshall International Stock Fund ("International Stock Fund")

  

To provide capital appreciation.

Marshall Government Income Fund ("Government Income Fund")

  

To provide current income.

Marshall Intermediate Bond Fund ("Intermediate Bond Fund")

  

To maximize total return consistent with current income.

Marshall Intermediate Tax-Free Fund
("Intermediate Tax-Free Fund")

  

To provide a high level of current income that is exempt from federal income tax and is consistent with preservation of capital.

Marshall Short-Term Income Fund ("Short-Term Income Fund")

  

To maximize total return consistent with current income.

Marshall Money Market Fund ("Money Market Fund")

  

To provide current income consistent with stability of principal.

The Funds (except Intermediate Tax-Free Fund) are offered in two classes of shares: Investor Class of Shares and Advisor Class of Shares. International Stock Fund and Money Market Fund offer three classes of shares: Investor Class of Shares, Advisor Class of Shares and Institutional Class of Shares. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Financial Highlights of Advisor Class of Shares and Institutional Class of Shares of the Funds are presented in separate annual reports.

2. Significant Accounting Policies

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States.

Investment Valuations-- Listed equity securities are valued at the last sale price reported on a national securities exchange. U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Money Market Fund's use of the amortized cost method to value portfolio securities is in accordance with Rule 2a-7 under the Act. For fluctuating net asset value Funds within the Corporation, short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities purchased with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in good faith using methods approved by the Board of Directors (the "Directors").

Statement of Cash Flows-- Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount reported as cash in the Statement of Assets and Liabilities and represents cash on hand in its custodian bank account and does not include any short-term investments at August 31, 2002.

Repurchase Agreements-- It is the policy of the Funds to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Funds to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement, including accrued interest.

The Funds will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Funds' adviser (or sub-adviser with respect to International Stock Fund) to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Directors. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Funds could receive less than the repurchase price on the sale of collateral securities.

Investment Income, Expenses and Distributions-- Interest income and expenses are accrued daily. All discounts/premiums are accreted/amortized for financial reporting purposes as required. Gains and losses are realized on pre-payment of mortgage-backed securities (pay-down gains and losses) are classified as part of interest income. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair market value. The Funds offer multiple classes of shares (except Intermediate Tax-Free Fund), which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Funds based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Effective September 1, 2001, the Corporation has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities and classifying paydown gains and losses as part of interest income. Prior to September 1, 2001, the Funds did not accrete discount and amortize premium on long-term debt securities. The cumulative effect of this accounting change had no impact on the total net assets of the Funds, but resulted in adjustments to the financial statements as follows:

 

As of September 1, 2001

 

For the Year Ended
August 31, 2002

 

    

Cost of
Investments

       

Undistributed
Net Investment
Income

       

Accumulated
Net
Realized
Gain (Loss)

     

Net
Investment
Income

       

Unrealized
Appreciation
(Depreciation)

       

Net Realized
Gain (Loss)

  

Increase (Decrease)

  

   

   

 

   

   

 

Government Income Fund

  

$ 41,338

    

$ (427,302

 )  

$ 468,640

  

$ (451,297

 )  

$ (19,790

 )  

$ 471,087

  

Intermediate Bond Fund

  

(258,062

 )  

(1,788,825

 )  

1,530,763

  

(2,005,509

 )  

978,504

    

1,027,005

  

Intermediate Tax-Free Fund

  

6,155

    

6,155

    

--

  

2,446

    

4,140

    

(6,586

 )

Short-Term Income Fund

  

19,907

   

(333,171

 )  

313,264

  

(504,599

 )  

122,704

    

381,895

  

The Statements of Changes in Net Assets and Financial Highlights for prior periods have not been restated to reflect this change in presentation.

Reclassification --Income and capital gain distributions are determined in accordance with income tax regulations which differ from generally accepted accounting principles. These differences are primarily attributable to differing book/tax treatments of net operating loss and foreign currency transactions. Amounts as of August 31, 2002 have been reclassed to reflect the following:

 

 

Increase (Decrease)

Fund Name

     

Paid-in Capital

      

Accumulated Net
Realized Gain (Loss)

    

Undistributed Net
Investment Income

  

Mid-Cap Value Fund

 

$ --

    

$ (180

 )     

$ 180

  

Mid-Cap Growth Fund

  

(2,100,246

 )  

1,160

    

2,099,086

  

Small-Cap Growth Fund

  

(1,267,862

 )  

(183

 )  

1,268,045

  

International Stock Fund

  

(1,784,754

 )  

882,997

    

901,757

  

Government Income Fund

  

--

    

(878,717

 )  

878,717

  

Intermediate Bond Fund

  

--

    

(4,022,910

 )  

4,022,910

  

Intermediate Tax-Free Fund

  

--

    

8,601

    

(8,601

 )

Short-Term Income Fund

  

(302,405

 )  

(548,817

 )  

851,222

  

Net investment income, net realized gains (losses) and net assets were not affected by this reclassification.

As of August 31, 2002, the tax composition of distributions was as follows:

Fund Name

    

Ordinary
Income

     

Tax-Free
Income

     

Long-Term
Capital Gains

Equity Income Fund

  

$ 18,467,629

  

$ --

  

$ 1,613,873

Large-Cap Growth & Income Fund

  

167,130

  

--

  

--

Mid-Cap Value Fund

  

10,593,982

  

--

  

12,780,149

Mid-Cap Growth Fund

  

--

  

--

  

885,770

Small-Cap Growth Fund

  

--

  

--

  

4,937,939

Government Income Fund

  

20,023,575

  

--

  

--

Intermediate Bond Fund

  

33,693,333

  

--

  

--

Intermediate Tax-Free Fund

  

--

  

3,989,466

  

--

Short-Term Income Fund

  

6,260,651

  

--

  

--

Money Market Fund

  

62,351,647

  

--

  

--

As of August 31, 2002, the components of distributable earnings on a tax basis were as follows:

Fund Name

     

Undistributed
Ordinary
Income

     

Tax-Free
Income

Unrealized
Appreciation
(Depreciation)

  

Equity Income Fund

  

$ 403,137

  

$ --

$ 15,271,692

  

Large-Cap Growth & Income Fund

  

13,865

  

--

25,453,819

  

Mid-Cap Value Fund

  

163,233

  

--

10,091,289

  

Mid-Cap Growth Fund

  

--

  

--

(33,791,342

 )

Small-Cap Growth Fund

  

--

  

--

(5,731,925

 )

International Stock Fund

  

--

  

--

(12,963,557

 )

Government Income Fund

  

606,135

  

--

16,717,892

  

Intermediate Bond Fund

  

1,398,949

  

--

15,152,310

  

Intermediate Tax-Free Fund

  

--

  

297,722

5,974,708

  

Short-Term Income Fund

  

257,653

  

--

156,575

  

Money Market Fund

  

2,801,647

  

--

--

  

At year-end, there were no significant differences between GAAP basis and tax basis of components of net assets, other than differences in the net unrealized appreciation (depreciation) in value of investments attributable to the tax treatment of premium and discount and wash sales loss deferrals.

Federal Taxes --It is the Funds' policy to comply with the provisions of Subchapter M of the Internal Revenue Code, as amended (the "Code") applicable to regulated investment companies and to distribute to shareholders each year substantially all of their income. Accordingly, no provisions for federal tax are necessary.

Withholding taxes on foreign dividends have been provided for in accordance with the applicable country's tax rules and rates.

At August 31, 2002, the following Funds had capital loss carryforwards for federal tax purposes, which will reduce each Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve each Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforwards will expire as listed below:

 

    

Capital Loss Carryforward to Expire in

Fund

  

2003

     

2004

     

2005

     

2006

     

2007

     

2008

     

2009

     

2010

     

Total

Equity Income Fund

  

$ --

  

$ --

  

$ --

  

$ --

  

$ --

  

$ --

  

$ --

  

$ 3,315,209

  

$ 3,315,209

Large Cap Growth & Income Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

4,529,087

  

19,615,825

  

24,144,912

Mid-Cap Value Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

405,788

  

405,788

Mid-Cap Growth Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

6,610,904

  

6,610,904

Small-Cap Growth Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

4,808,611

  

4,808,611

International Stock Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

2,042,934

  

63,689,740

  

65,732,674

Government Income Fund

  

--

  

--

  

--

  

--

  

--

  

8,554,228

  

--

  

--

  

8,554,228

Intermediate Bond Fund

  

10,386,677

  

6,100,494

  

--

  

--

  

--

  

2,990,074

  

--

  

6,283,428

  

25,760,673

Intermediate Tax-Free Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

364,215

  

--

  

364,215

Short-Term Income Fund

  

1,898,650

  

556,158

  

545,815

  

618,371

  

952,637

  

222,218

  

928,524

  

944,182

  

6,666,555

Money Market Fund

  

--

  

--

  

--

  

--

  

--

  

--

  

--

  

145,822

  

145,822

Additionally, the following net capital losses or currency losses attributable to security transactions incurred after October 31, 2001 are treated as arising on September 1, 2002, the first day of each Fund's next taxable year:

Fund

     

Capital Loss

     

Currency
Loss

Large Cap Growth & Income Fund

  

$ 18,510,126

  

$ --

Mid-Cap Value Fund

  

1,757,647

  

--

Mid-Cap Growth Fund

  

66,724,864

  

--

Small-Cap Growth Fund

  

19,163,651

  

--

International Stock Fund

  

36,566,228

  

792,391

Government Income

 

181,379

  

--

Intermediate Bond Fund

  

10,765,529

  

--

Short-Term Income Fund

  

363,769

  

--

Money Market Fund

  

7,007

  

--

When-Issued and Delayed Delivery Transactions --The Funds may engage in when-issued or delayed delivery transactions. The Funds record when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked-to-market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Futures Contracts --Equity Income Fund, Large-Cap Growth & Income Fund, Mid-Cap Value Fund, Mid-Cap Growth Fund and Small-Cap Growth Fund purchase stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities.

At August 31, 2002, the Equity Income Fund had outstanding futures contracts as set forth below:

Fund

    

Expiration Date

    

Contracts to Receive

    

Position

    

Unrealized
Depreciation

Equity Income Fund

  

September 2002

  

21 S&P 500

  

Long

  

$ (504,414)

Written Options Contracts --Equity Income Fund and Small-Cap Growth Fund may write option contracts. A written option obligates the Fund to deliver a call, or to receive a put, for the contract amount upon exercise by the holder of the option. The value of the option contract is recorded as a liability and unrealized gain or loss is measured by the difference between the current value and the premium received. For the year ended August 31, 2002, the Equity Income Fund and the Small-Cap Growth Fund had $(1,475,377) and $47,198, respectively, in realized gain (loss) on written options.

The following is a summary of the Small-Cap Growth Fund's written option activity:

Contracts

    

Number of
Contracts

       

Premium

  

Outstanding @ 8/31/01

  

0

    

$ 0

  

Options written

  

800

    

74,398

  

Options expired

  

0

    

0

  

Options closed

  

(800

 )  

(74,398

 )

Options assigned

  

0

    

0

  

Outstanding @ 8/31/02

  

0

    

$ 0

  

The following is a summary of the Equity Income Fund's written option activity:

Contracts

     

Number of
Contracts

    

Premium

  

Outstanding @ 8/31/01

  

10,490

    

$ 542,471

  

Options written

  

46,144

    

5,320,496

  

Options expired

  

(32,266

 )     

(2,822,848)

 )

Options closed

  

(20,358

 )  

(2,644,137

 )

Options assigned

  

(21

 )  

(5,032

 )

Outstanding @ 8/31/02

  

3,989

    

$ 390,950

  

At August 31, 2002, the Equity Income Fund had the following outstanding options:

Contract

    

Type

    

Expiration Date

    

Exercise
Price

    

Number of
Contracts

    

Market
Value

    

Unrealized
Appreciation
(Depreciation)

  

Clorox Co.

  

Call

  

October 2002

  

$ 45.00

  

375

  

$ 39,375

  

$ 4,749

  

Campbell Soup Co.

  

Call

  

September 2002

 

25.00

  

310

  

5,425

  

14,104

  

Procter & Gamble Co.

  

Call

  

September 2002

  

95.00

  

100

  

1,500

  

8,700

  

Ryder System, Inc.

  

Call

  

November 2002

  

30.00

  

284

  

12,070

  

11,501

  

3M Co.

  

Call

  

September 2002

  

135.00

  

100

  

4,000

  

16,449

  

Albertson's, Inc.

  

Put

  

September 2002

  

27.50

  

400

  

82,000

  

(41,201

 )

Alcoa, Inc.

  

Put

  

September 2002

  

22.50

  

320

  

7,200

  

16,159

  

Bank of America Corp.

  

Put

  

September 2002

  

47.50

  

250

  

1,250

  

36,749

  

Bristol-Myers Squibb Co.

  

Put

  

September 2002

  

17.50

  

600

  

9,000

  

49,198

  

Goodrich Corp.

  

Put

  

September 2002

  

20.00

  

650

  

40,625

  

40,298

  

Hewlett Packard Co.

  

Put

  

September 2002

  

10.00

  

600

  

3,000

  

28,799

  
       
     
 

Net Unrealized Appreciation on Written Options Contracts

  

 

3,989

  

 

$ 185,505

  
       
     
 

Foreign Exchange Contracts --International Stock Fund may enter into foreign currency exchange contracts as a way of managing foreign exchange rate risk. The International Stock Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross hedge against either specific transactions or portfolio positions. The objective of the International Stock Fund's foreign currency hedging transactions is to reduce the risk that the U.S. dollar value of the International Stock Fund's foreign currency denominated securities will decline in value due to changes in foreign currency exchange rates. All foreign currency exchange contracts are "marked-to-market" daily at the applicable translation rates resulting in unrealized gains or losses. Realized gains or losses are recorded at the time the foreign currency exchange contract is offset by entering into a closing transaction or by the delivery or receipt of the currency. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. As of August 31, 2002, International Stock Fund had outstanding foreign currency exchange contracts as set forth below:

Settlement Date

     

Foreign Currency
Units to
Deliver/Receive

     

In Exchange

     

Contract at
Value

     

Unrealized
Appreciation
(Depreciation)

  

Contracts sold:

  

 

 

 

 

 

09/03/2002

  

111,328 Euro Dollar

  

$ 109,380

  

$ 109,185

  

$ 195

  

09/03/2002

  

1,245,396 British Pound Sterling

  

1,917,909

  

1,927,624

  

(9,715

 )

09/03/2002

  

765,821 Singapore Dollar

  

436,863

  

437,650

  

(787

 )
   
 

Net Unrealized Depreciation on Foreign Currency Exchange Contacts

  

$ (10,307

 )
   
 

Foreign Currency Translation --The accounting records of the Funds are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FCs") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds' books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Dollar Roll Transactions --The Funds, except for Money Market Fund, may enter into dollar roll transactions, with respect to mortgage securities issued by Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, in which the Funds loan mortgage securities to financial institutions and simultaneously agree to accept substantially similar (same type, coupon and maturity) securities at a later date at an agreed upon price. Dollar roll transactions are short-term financing arrangements which will not exceed twelve months. The Funds will use the proceeds generated from the transactions to invest in short-term investments, which may enhance the Funds' current yield and total return.

Information regarding dollar roll transactions for the Government Income Fund for the year ended August 31, 2002 was as follows:

Maximum amount outstanding during the period

     

$ 70,595,852

Average amount outstanding during the period 1

 

$ 60,415,948

Average monthly shares outstanding during the period

  

39,691,118

Average debt per share outstanding during the period

  

1.52

(1) The average amount outstanding during the period was calculated by adding the borrowings at the end of the day and dividing the sum by the number of days in year ended August 31, 2002.

Securities Lending --The Funds participate in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. The Funds receive cash as collateral in return for the securities and record a corresponding payable for collateral due to the respective broker. The amount of cash collateral received is maintained at a minimum level of 100% of the prior day's market value on securities loaned. Collateral is reinvested in short-term securities including overnight repurchase agreements, commercial paper, master notes, floating rate corporate notes (with at least quarterly reset rates) and money market funds. On May 18, 2000, the Securities and Exchange Commission issued an order to the Marshall Funds that exempts certain securities lending activities from prohibitions under the Act. Under the terms of the exemptive order, (i) the Funds may pay a portion of net revenue to Marshall & Ilsley Trust Company N.A. (M&I Trust) for its services as securities lending agent, and (ii) cash collateral received for a loan of one Fund's securities may be invested jointly with collateral received for loans of other Funds' securities.

As of August 31, 2002, the value of securities loaned, the payable on collateral due to broker and the value of reinvested cash collateral securities were as follows:

Fund

     

Market Value
of Securities
Loaned

     

Payable on
Collateral
Due to Broker

     

Reinvested
Collateral
Securities

Equity Income Fund

  

$ 9,784,132

  

$ 10,101,512

  

$ 10,101,512

Large-Cap Growth & Income Fund

  

41,083,246

  

42,415,906

  

42,415,906

Mid-Cap Value Fund

  

31,619,934

  

32,645,623

  

32,645,623

Mid-Cap Growth Fund

  

61,883,685

  

63,891,070

  

63,891,070

Small-Cap Growth Fund

  

21,595,526

  

22,296,042

  

22,296,042

International Stock Fund

  

55,378,548

  

57,174,918

  

57,174,918

Government Income Fund

  

67,779,010

  

69,977,628

  

69,977,628

Intermediate Bond Fund

  

101,192,238

  

104,474,716

  

104,474,716

Individual reinvested cash collateral securities at August 31, 2002 are as follows:

 

Investments

     

Equity
Income
Fund

     

Large-Cap
Growth &
Income
Fund

     

Mid-Cap
Value
Fund

     

Mid-Cap
Growth
Fund

     

Small-Cap
Growth
Fund

     

International
Stock Fund

     

Government
Income
Fund

     

Intermediate
Bond Fund

     

Total

Provident Money Market Fund

  

$ 1,153,395

  

$ 4,843,069

  

$ 3,727,493

  

$ 7,295,115

  

$ 2,545,773

  

$ 6,528,260

  

$ 7,990,080

  

$ 11,928,974

  

$ 46,012,159

Merrimac Money Market Fund

  

1,058,811

  

4,445,913

  

3,421,820

  

6,696,877

  

2,337,007

  

5,992,910

  

7,334,853

  

10,950,738

  

42,238,929

Dreyfus Cash Management Plus MMKT

  

840,459

  

3,529,059

  

2,716,158

  

5,315,821

  

1,855,059

  

4,757,028

  

5,822,230

  

8,692,433

  

33,528,247

Nationsbank Inst. Reserves

  

25,017

  

105,045

  

80,849

  

158,229

  

55,217

  

141,597

  

173,303

  

258,737

  

997,994

Reserves Primary 15

  

1,253,359

  

5,262,814

  

4,050,552

  

7,927,376

  

2,766,415

  

7,094,060

  

8,682,574

  

12,962,850

  

50,000,000

JP Morgan Master Note

  

325,873

  

1,368,332

  

1,053,144

  

2,061,118

  

719,268

  

1,844,455

  

2,257,469

  

3,370,341

  

13,000,000

Metlife Funding Agreement

  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000

Wisconsin Public Service Master Note

  

250,672

  

1,052,563

  

810,110

  

1,585,475

  

553,283

  

1,418,812

  

1,736,515

  

2,592,570

  

10,000,000

Monumental Life Ins. Master Note

  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000

Four Winds Funding LLC

  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000

Key Bank N.A.

  

250,770

  

1,052,973

  

810,426

  

1,586,094

  

553,498

  

1,419,365

  

1,737,192

  

2,593,582

  

10,003,900

Merrill Lynch & Co.

  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000

Washington Mutual Bank FA

  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000

American Honda Finance

  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000

Bendix Comm Vehicle System

  

376,008

  

1,578,844

  

1,215,166

  

2,378,213

  

829,924

  

2,128,218

  

2,604,772

  

3,888,855

  

15,000,000

Goldman Sachs Group

  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000

Household Finance Corp.

  

363,474

  

1,526,216

  

1,174,660

  

2,298,939

  

802,260

  

2,057,277

  

2,517,947

  

3,759,227

  

14,500,000

Questar Corp.

  

106,536

  

447,339

  

344,297

  

673,827

  

235,145

  

602,995

  

738,019

  

1,101,842

  

4,250,000

American Express Centurion

  

501,344

  

2,105,126

  

1,620,221

  

3,170,950

  

1,106,565

  

2,837,624

  

3,473,030

  

5,185,140

  

20,000,000

Wisconsin Energy Corp. Disc C/P

  

462,394

  

1,941,577

  

1,494,345

  

2,924,597

  

1,020,596

  

2,617,167

  

3,203,208

  

4,782,302

  

18,446,186

Restricted Securities --Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Funds or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt froms registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Funds will not incur any registration costs upon such resales. The Intermediate Bond Fund's and Short-Term Income Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, the fair value as determined in good faith using methods approved by the Directors. The Money Market Fund's restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act.

Additional information on each illiquid restricted security held by the Money Market Fund at August 31, 2002 is as follows:

Security

     

Acquisition Date

     

Acquisition Cost

ABB Capital USA

  

11/14/2001

  

$ 75,000,000

GE Life & Annuity Funding Agreement

  

4/22/2000

  

75,000,000

Monumental Life Funding Agreement

 

8/2/1993 - 11/30/1993

  

40,000,000

Monumental Life Funding Agreement

 

10/15/1996

  

10,000,000

Monumental Life Funding Agreement

 

1/4/2000

  

25,000,000

Travelers Insurance Company

 

1/19/2001

  

50,000,000

Other --Investment transactions are accounted for on a trade date basis.

3. Capital Stock

The Articles of Incorporation permit the Directors to issue an indefinite number of full and fractional shares of common stock, par value $0.0001 per share. At August 31, 2002, the capital paid-in was as follows:

Fund

     

Capital Paid-In

Equity Income Fund

  

$ 330,512,179

Large-Cap Growth & Income Fund

  

297,111,440

Mid-Cap Value Fund

  

192,118,289

Mid-Cap Growth Fund

  

312,732,693

Small-Cap Growth Fund

  

109,857,402

International Stock Fund

  

417,966,476

Government Income Fund

  

373,456,503

Intermediate Bond Fund

  

657,078,646

Intermediate Tax-Free Fund

  

104,082,179

Short-Term Income Fund

  

122,086,161

Money Market Fund

  

2,881,959,091

Transactions in capital stock were as follows:

 

    

Year Ended
August 31, 2002

 

   

Year Ended
August 31, 2001

 

 

 

Shares

 

   

 

Amount

 

 

Shares

 

   

 

Amount

 

EQUITY INCOME FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

3,954,436

 

 

$

52,646,401

 

 

3,753,785

 

 

$

56,629,266

 

Shares issued to shareholders in payment of distributions declared

 

1,256,721

 

 

 

17,467,488

 

 

303,974

 

 

 

4,592,039

 

Shares redeemed

 

(5,489,769

)

 

 

(75,258,161

)

 

(4,837,092

)

 

 

(72,875,722

)

Net change resulting from Investor Class of Shares transactions

 

(278,612

)

 

$

(5,144,272

)

 

(779,333

)

 

$

(11,654,417

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY INCOME FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

169,201

 

 

$

2,319,923

 

 

126,934

 

 

$

1,916,805

 

Shares issued to shareholders in payment of distributions declared

 

13,715

 

 

 

190,165

 

 

2,779

 

 

 

41,925

 

Shares redeemed

 

(70,025

)

 

 

(959,162

)

 

(25,214

)

 

 

(380,859

)

Net change resulting from Advisor Class of Shares transactions

 

112,891

 

 

$

1,550,926

 

 

104,499

 

 

$

1,577,871

 

Net change resulting from Fund Share transactions

 

(165,721

)

 

$

(3,593,346

)

 

(674,834

)

 

$

(10,076,546

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LARGE-CAP GROWTH & INCOME FUND--INVESTOR CLASS

Shares sold

 

3,423,301

 

 

$

43,997,592

 

 

3,640,354

 

 

$

58,100,434

 

Shares issued to shareholders in payment of distributions declared

 

8,575

 

 

 

105,741

 

 

1,316,487

 

 

 

21,124,005

 

Shares redeemed

 

(5,616,030

)

 

 

(69,582,834

)

 

(3,357,098

)

 

 

(54,334,387

)

Net change resulting from Investor Class of Shares transactions

 

(2,184,154

)

 

$

(25,479,501

)

 

1,599,743

 

 

$

24,890,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LARGE-CAP GROWTH & INCOME FUND--ADVISOR CLASS

 

 

 

Shares sold

 

195,011

 

 

$

2,472,860

 

 

188,189

 

 

$

3,039,967

 

Shares issued to shareholders in payment of distributions declared

 

264

 

 

 

2,195

 

 

12,534

 

 

 

201,047

 

Shares redeemed

 

(73,575

)

 

 

(918,448

)

 

(41,770

)

 

 

(640,861

)

Net change resulting from Advisor Class of Shares transactions

 

121,700

 

 

$

1,556,607

 

 

158,953

 

 

$

2,600,153

 

Net change resulting from Fund Share transactions

 

(2,062,454

)

 

$

(23,922,894

)

 

1,758,696

 

 

$

27,490,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP VALUE FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

8,526,115

 

 

$

101,629,669

 

 

6,132,824

 

 

$

74,762,587

 

Shares issued to shareholders in payment of distributions declared

 

1,892,346

 

 

 

22,305,472

 

 

665,231

 

 

 

6,982,264

 

Shares redeemed

 

(5,564,460

)

 

 

(64,311,133

)

 

(3,039,567

)

 

 

(35,807,926

)

Net change resulting from Investor Class of Shares transactions

 

4,854,001

 

 

$

59,624,008

 

 

3,758,488

 

 

$

45,936,925

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP VALUE FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

192,014

 

 

$

2,284,297

 

 

92,317

 

 

$

1,097,181

 

Shares issued to shareholders in payment of distributions declared

 

28,716

 

 

 

338,441

 

 

7,508

 

 

 

78,933

 

Shares redeemed

 

(29,133

)

 

 

(343,354

)

 

(17,047

)

 

 

(201,444

)

Net change resulting from Advisor Class of Shares transactions

 

191,597

 

 

$

2,279,384

 

 

82,778

 

 

$

974,670

 

Net change resulting from Fund Share transactions

 

5,045,598

 

 

$

61,903,392

 

 

3,841,266

 

 

$

46,911,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP GROWTH FUND--INVESTOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

4,502,457

 

 

$

55,289,872

 

 

4,141,183

 

 

$

73,753,844

 

Shares issued to shareholders in payment of distributions declared

 

62,977

 

 

 

869,078

 

 

6,070,360

 

 

 

95,729,696

 

Shares redeemed

 

(7,078,048

)

 

 

(82,822,587

)

 

(5,654,242

)

 

 

(97,229,757

)

Net change resulting from Investor Class of Shares transactions

 

(2,512,614

)

 

$

(26,663,637

)

 

4,557,301

 

 

$

72,253,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MID-CAP GROWTH FUND--ADVISOR CLASS

 

 

 

 

 

 

 

 

 

 

 

 

Shares sold

 

89,447

 

 

$

1,086,686

 

 

111,226

 

 

$

1,992,014

 

Shares issued to shareholders in payment of distributions declared

 

629

 

 

 

8,684

 

 

42,035

 

 

 

662,892

 

Shares redeemed

 

(33,654

)

 

 

(389,492

)

 

(30,405

)

 

 

(456,439

)

Net change resulting from Advisor Class of Shares transactions

 

56,422

 

 

$

705,878

 

 

122,856

 

 

$

2,198,467

 

Net change resulting from Fund Share transactions

 

(2,456,192

)

 

$

(25,957,759

)

 

4,680,157

 

 

$

74,452,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMALL-CAP GROWTH FUND--INVESTOR CLASS

Shares sold

 

3,415,230

 

 

$

38,996,606

 

 

2,979,586

 

 

$

41,362,567

 

Shares issued to shareholders in payment of distributions declared

 

386,177

 

 

 

4,757,712

 

 

1,065,835

 

 

 

13,088,446

 

Shares redeemed

 

(3,291,813

)

 

 

(35,067,094

)

 

(4,143,430

)

 

 

(55,181,701

)

Net change resulting from Investor Class of Shares transactions

 

509,594

 

 

$

8,687,224

 

 

(98,009

)

 

$

(730,688

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SMALL-CAP GROWTH FUND--ADVISOR CLASS

Shares sold

 

182,325

 

 

$

2,125,578

 

 

98,880

 

 

$

1,336,884

 

Shares issued to shareholders in payment of distributions declared

 

9,216

 

 

 

113,545

 

 

16,402

 

 

 

201,410

 

Shares redeemed

 

(103,222

)

 

 

(1,184,092

)

 

(18,911

)

 

 

(246,619

)

Net change resulting from Advisor Class of Shares transactions

 

88,319

 

 

$

1,055,031

 

 

96,371

 

 

$

1,291,675

 

Net change resulting from Fund Share transactions

 

597,913

 

 

$

9,742,255

 

 

(1,638

)

 

$

560,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--INVESTOR CLASS

Shares sold

 

17,636,158

 

 

$

174,748,741

 

 

15,212,008

 

 

$

195,353,624

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

2,469,820

 

 

 

32,972,095

 

Shares redeemed

 

(19,632,221

)

 

 

(194,599,116

)

 

(16,197,785

)

 

 

(209,170,751

)

Net change resulting from Investor Class of Shares transactions

 

(1,996,063

)

 

$

(19,850,375

)

 

1,484,043

 

 

$

19,154,968

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--ADVISOR CLASS

Shares sold

 

1,430,452

 

 

$

14,109,749

 

 

420,204

 

 

$

5,315,028

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

28,817

 

 

 

384,702

 

Shares redeemed

 

(1,312,246

)

 

 

(13,240,261

)

 

(251,427

)

 

 

(2,851,448

)

Net change resulting from Advisor Class of Shares transactions

 

                        

 

Net change resulting from Fund Share transactions

 

118,206

 

 

$

869,488

 

 

197,594

 

 

$

2,848,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERNATIONAL STOCK FUND--INSTITUTIONAL CLASS

Shares sold

 

2,973,838

 

 

$

29,826,781

 

 

3,484,294

 

 

$

46,906,402

 

Shares issued to shareholders in payment of distributions declared

 

--

 

 

 

--

 

 

1,078,820

 

 

 

14,434,613

 

Shares redeemed

 

(2,217,162

)

 

 

(21,877,897

)

 

(2,661,048

)

 

 

(31,799,647

)

Net change resulting from Institutional Class of Shares transactions

 

756,676

 

 

$

7,948,884

 

 

1,902,066

 

 

$

29,541,368

 

Net change resulting from Fund Share transactions

 

(1,121,181

)

 

$

(11,032,003

)

 

3,583,703

 

 

$

51,544,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT INCOME FUND--INVESTOR CLASS

Shares sold

 

9,619,972

 

 

$

92,152,089

 

 

6,866,098

 

 

$

64,422,793

 

Shares issued to shareholders in payment of distributions declared

 

1,273,586

 

 

 

12,197,150

 

 

1,484,020

 

 

 

13,955,058

 

Shares redeemed

 

(11,955,890

)

 

 

(114,431,983

)

 

(7,287,114

)

 

 

(68,532,104

)

Net change resulting from Investor Class of Shares transactions

 

(1,062,332

)

 

$

(10,082,744

)

 

1,063,004

 

 

$

9,845,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GOVERNMENT INCOME FUND--ADVISOR CLASS

Shares sold

 

316,703

 

 

$

3,026,512

 

 

107,402

 

 

$

1,009,391

 

Shares issued to shareholders in payment of distributions declared

 

13,493

 

 

 

129,303

 

 

9,562

 

 

 

89,985

 

Shares redeemed

 

(192,551

)

 

 

(1,841,093

)

 

(21,965

)

 

 

(206,127

)

Net change resulting from Advisor Class of Shares transactions

 

137,645

 

 

$

1,314,722

 

 

94,999

 

 

$

893,249

 

Net change resulting from Fund Share transactions

 

(924,687

)

 

$

(8,768,022

)

 

1,158,003

 

 

$

10,738,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERMEDIATE BOND FUND--INVESTOR CLASS

Shares sold

 

16,880,357

 

 

$

158,501,362

 

 

17,120,862

 

 

$

159,975,612

 

Shares issued to shareholders in payment of distributions declared

 

1,756,483

 

 

 

16,480,250

 

 

1,847,000

 

 

 

17,238,638

 

Shares redeemed

 

(19,133,698

)

 

 

(179,853,591

)

 

(18,527,594

)

 

 

(173,100,999

)

Net change resulting from Investor Class of Shares transactions

 

(496,858

)

 

$

(4,871,979

)

 

440,268

 

 

$

4,113,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERMEDIATE BOND FUND--ADVISOR CLASS

Shares sold

 

291,333

 

 

$

2,732,845

 

 

143,925

 

 

$

1,343,401

 

Shares issued to shareholders in payment of distributions declared

 

18,596

 

 

 

174,431

 

 

14,177

 

 

 

132,442

 

Shares redeemed

 

(198,831

)

 

 

(1,866,218

)

 

(33,510

)

 

 

(313,102

)

Net change resulting from Advisor Class of Shares transactions

 

111,098

 

 

$

1,041,058

 

 

124,592

 

 

$

1,162,741

 

Net change resulting from Fund Share transactions

 

(385,760

)

 

$

(3,830,921

)

 

564,860

 

 

$

5,275,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTERMEDIATE TAX-FREE FUND--INVESTOR CLASS

Shares sold

 

2,281,709

 

 

$

23,476,092

 

 

1,780,346

 

 

$

18,030,777

 

Shares issued to shareholders in payment of distributions declared

 

38,412

 

 

 

396,321

 

 

37,466

 

 

 

379,104

 

Shares redeemed

 

(1,825,913

)

 

 

(18,832,499

)

 

(1,541,044

)

 

 

(15,558,697

)

Net change resulting from Fund Share Transactions

 

494,208

 

 

$

5,039,914

 

 

276,768

 

 

$

2,851,184

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INCOME FUND--INVESTOR CLASS

Shares sold

 

5,454,176

 

 

$

51,537,360

 

 

4,478,636

 

 

$

42,170,518

 

Shares issued to shareholders in payment of distributions declared

 

353,190

 

 

 

3,323,105

 

 

458,652

 

 

 

4,314,479

 

Shares redeemed

 

(6,890,903

)

 

 

(64,691,429

)

 

(5,022,532

)

 

 

(47,251,221

)

Net change resulting from Investor Class of Shares transactions

 

(1,083,537

)

 

$

(9,830,964

)

 

(85,244

)

 

$

(766,224

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INCOME FUND--ADVISOR CLASS(1)

Shares sold

 

133,339

 

 

$

1,247,308

 

 

14,727

 

 

$

138,907

 

Shares issued to shareholders in payment of distributions declared

 

2,153

 

 

 

20,188

 

 

317

 

 

 

3,001

 

Shares redeemed

 

(58,185

)

 

 

(542,360

)

 

(4,889

)

 

 

(46,203

)

Net change resulting from Advisor Class of Shares transactions

 

77,307

 

 

$

725,136

 

 

10,155

 

 

$

95,705

 

Net change resulting from Fund Share transactions

 

(1,006,230

)

 

$

(9,105,828

)

 

(75,089

)

 

$

(670,519

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MONEY MARKET FUND--INVESTOR CLASS

Shares sold

 

5,427,591,574

 

 

$

5,427,591,574

 

 

5,349,844,467

 

 

$

5,349,844,467

 

Shares issued to shareholders in payment of distributions declared

 

11,415,196

 

 

 

11,415,196

 

 

22,470,409

 

 

 

22,470,409

 

Shares redeemed

 

(5,278,253,683

)

 

 

(5,278,253,683

)

 

(5,451,687,216

)

 

 

(5,451,687,216

)

Net change resulting from Investor Class of Shares transactions

 

160,753,087

 

 

$

160,753,087

 

 

(79,372,340

)

 

$

(79,372,340

)

 

 

 

 

MONEY MARKET FUND--ADVISOR CLASS

Shares sold

 

281,645,796

 

 

$

281,645,796

 

 

440,122,578

 

 

$

440,122,578

 

Shares issued to shareholders in payment of distributions declared

 

2,132,999

 

 

 

2,132,999

 

 

5,940,215

 

 

 

5,940,215

 

Shares redeemed

 

(297,823,697

)

 

 

(297,823,697

)

 

(459,131,150

)

 

 

(459,131,150

)

Net change resulting from Advisor Class of Shares transactions

 

(14,044,902

)

 

$

(14,044,902

)

 

(13,068,357

)

 

$

(13,068,357

)

 

 

 

 

MONEY MARKET FUND--INSTITUTIONAL CLASS

Shares sold

 

4,304,882,665

 

 

$

4,304,882,665

 

 

3,217,717,900

 

 

$

3,217,717,900

 

Shares issued to shareholders in payment of distributions declared

 

2,761,641

 

 

 

2,761,641

 

 

2,009,341

 

 

 

2,009,341

 

Shares redeemed

 

(4,312,138,653

)

 

 

(4,312,138,653

)

 

(2,446,906,796

)

 

 

(2,446,906,796

)

Net change resulting from Institutional Class of Shares transactions

 

(4,494,347

)

 

$

(4,494,347

)

 

772,820,445

 

 

$

772,820,445

 

Net change resulting from Fund Share transactions

 

142,213,838

 

 

$

142,213,838

 

 

680,379,748

 

 

$

680,379,748

 

(1) For the period from October 31, 2000 (start of performance) to August 31, 2001.

4. Investment Adviser Fee and Other Transactions with Affiliates

Investment Adviser Fee --M&I Investment Management Corp., the Funds' investment adviser (the "Adviser"), receives for its services an annual investment adviser fee based on a percentage of each Fund's average daily net assets as listed below. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Fund

    

Annual Rate

Equity Income Fund

  

0.75%

Large-Cap Growth & Income Fund

  

0.75%

Mid-Cap Value Fund

  

0.75%

Mid-Cap Growth Fund

  

0.75%

Small-Cap Growth Fund

  

1.00%

International Stock Fund

 

1.00%

Government Income Fund

  

0.75%

Intermediate Bond Fund

  

0.60%

Intermediate Tax-Free Fund

  

0.60%

Short-Term Income Fund

  

0.60%

Money Market Fund

  

0.15%

International Stock Fund's sub-adviser is BPI Global Asset Management LLP (the "Sub-Adviser"). The Adviser compensates the Sub-Adviser based on the level of average aggregate daily net assets of International Stock Fund.

Administrative Fee --M&I Trust, under the Administrative Services Agreement, provides the Funds with administrative personnel and services. The fee paid to M&I Trust is based on each Fund's average daily net assets as follows:

Maximum Fee

     

Fund's Average Daily Net Assets

0.100 %

  

on the first $250 million

0.095 %

  

on the next $250 million

0.080 %

  

on the next $250 million

0.060 %

  

on the next $250 million

0.040 %

  

on the next $500 million

0.020 %

  

on assets in excess of $1.5 billion

Federated Administrative Services is the sub-administrator and will be paid by M&I Trust, not by the Funds.

Distribution Services Fee --The Funds have adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Funds will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Funds to finance activities intended to result in the sale of shares of the Funds' Advisor Class of Shares. The Plan provides that the Funds may incur distribution expenses up to 0.25% of the average daily net assets of Funds' Advisor Class of Shares (except Money Market Fund's Advisor Class of Shares which may accrue up to 0.30%) annually, to compensate FSC. Effective October 31, 2002, the principal distributor will change to Edgewood Services, Inc.

Shareholder Services Fee --Under the terms of a Shareholder Services Agreement with Marshall Investor Services ("MIS"), each Fund will pay MIS up to 0.25% of average daily net assets of the Funds' Investor and Advisor Class of Shares for the period. The fee paid to MIS is used to finance certain services for shareholders and to maintain shareholder accounts. MIS may voluntarily choose to waive any portion of its fee. MIS can modify or terminate this voluntary waiver at any time at its sole discretion.

Transfer and Dividend Disbursing Agent Fees and Expenses --Federated Services Company ("FServ"), through its subsidiary, Federated Shareholders Services Company ("FSSC"), serves as transfer and dividend disbursing agent for the Funds. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees --FServ maintains the Funds' accounting records for which it receives a fee. The fee is based on the level of each Fund's average daily net assets for the period, plus out-of-pocket expenses.

Custodian Fees --M&I Trust is the Funds' custodian. M&I Trust receives fees based on the level of each Fund's average daily net assets for the period. The custodian also charges a fee in connection with securities lending activities of the Funds.

General --Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees, of one or more of the above companies.

5. Investment Transactions

Purchases and sales of investments, excluding short-term securities and long-term U.S. government securities, for the year ended August 31, 2002, were as follows:

Fund

    

Purchases

    

Sales

Equity Income Fund

  

$ 187,833,392

  

$ 207,860,220

Large-Cap Growth & Income Fund

  

210,692,200

  

201,663,507

Mid-Cap Value Fund

  

142,577,142

  

83,402,604

Mid-Cap Growth Fund

  

426,331,121

  

434,359,755

Small-Cap Growth Fund

  

292,062,024

  

281,564,405

International Stock Fund

  

265,811,390

  

271,464,009

Intermediate Bond Fund

  

319,407,757

  

287,138,111

Intermediate Tax-Free Fund

  

29,653,585

  

26,918,896

Short-Term Income Fund

  

14,165,600

  

26,783,404

Purchases and sales of long-term U.S. government securities, for the year ended August 31, 2002, were as follows:

Fund

    

Purchases

    

Sales

Government Income Fund

  

$ 300,936,320

  

$ 338,737,966

Intermediate Bond Fund

  

785,625,210

  

822,184,907

Short-Term Income Fund

  

47,415,232

  

35,237,227

6. Line of Credit

Marshall Funds, Inc., on behalf of its respective Funds (except for the Money Market Fund) entered into a $50,000,000 unsecured, committed revolving line of credit ("LOC") agreement with State Street Bank & Trust Company. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemptions payments. Borrowings are charged interest at a rate of 0.50% per annum over the Federal Funds Rate. The LOC includes a commitment fee of 0.10% per annum on the daily unused portion. The Funds did not utilize the LOC during the year ended August 31, 2002.

FEDERAL INCOME TAX INFORMATION

The Funds hereby designate the following distributions as capital gain distributions for the year ended August 31, 2002:

Equity Income Fund

    

$ 1,613,873

Mid-Cap Value Fund

  

12,780,149

Mid-Cap Growth Fund

  

885,770

Small-Cap Growth Fund

  

4,937,939

At August 31, 2002, the following percentage represents the portion of distributions from net investment income, which is exempt from federal income tax, other than alternative minimum tax:

Intermediate Tax-Free Fund

    

100%

Report of Ernst & Young LLP, Independent Auditors

To the Board of Directors and Shareholders of
Marshall Funds, Inc.:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Marshall Equity Income Fund, the Marshall Large-Cap Growth & Income Fund, the Marshall Mid-Cap Value Fund, the Marshall Mid-Cap Growth Fund, the Marshall Small-Cap Growth Fund, the Marshall International Stock Fund, the Marshall Government Income Fund, the Marshall Intermediate Bond Fund, the Marshall Intermediate Tax-Free Fund, the Marshall Short-Term Income Fund, and the Marshall Money Market Fund (the eleven portfolios constituting Marshall Funds, Inc.) (the "Funds"), as of August 31, 2002, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the statement of cash flows for the Marshall Government Income Fund for the year then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended August 31, 1998 were audited by other auditors whose report, dated October 23, 1998, expressed an unqualified opinion on those financial highlights.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of August 31, 2002, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from the brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting Marshall Funds, Inc., as identified above, at August 31, 2002, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, the statement of cash flows for the year then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ernst & Young LLP

Boston, Massachusetts
October 15, 2002

Board of Directors and Corporation Officers

The following tables give information about each Board member and the senior officers of the Funds. The tables separately list Board members who are "interested persons" of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent" Board members). Marshall Funds, Inc. consists of eleven investment company portfolios. Unless otherwise noted, each Board member oversees all portfolios in Marshall Funds, Inc. and serves for an indefinite term. The Funds' Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-236-FUND (3863).

INTERESTED DIRECTORS BACKGROUND

Name
Age
Address
Positions Held with Corporation
Length of Time Served

    

Principal Occupation(s), Previous Positions and Other Directorships Held

John M. Blaser*
 Age: 45
1000 North Water Street
Milwaukee, WI
PRESIDENT AND DIRECTOR
Began serving: May 1999

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.
Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.
 

 

 

David W. Schulz*
Age: 44
1000 North Water Street
Milwaukee, WI
DIRECTOR
Began serving: May 1999

 

Principal Occupations: President and Director, M&I Investment Management Corp.; Vice President, M&I Trust.

* Reasons for Interested Status: Mr. Blaser and Mr. Schulz are "interested" due to positions that they hold with M&I Investment Management Corp., the Funds' Adviser.

 

 

 

INDEPENDENT DIRECTORS BACKGROUND

John DeVincentis
Age: 68
13821 12th Street
Kenosha, WI
DIRECTOR
Began serving: October 1993

 

Principal Occupations: Independent Financial Consultant; Retired, formerly, Senior Vice President of Finance, In-Sink-Erator Division of Emerson Electric Corp. (electrical products manufacturer).
 

 

 

Duane E. Dingmann
Age: 71
1631 Harding Ave

Eau Claire, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Retired; formerly President and owner, Trubilt Auto Body, Inc. and Telephone Specialists, Inc.

Other Directorships Held: Class B (nonbanking) Director, Ninth Federal Reserve District, Minneapolis, MN.
 

 

 

James Mitchell
Age: 55
2808 Range Line Circle
Mequon, WI
DIRECTOR
Began serving: March 1999

 

Principal Occupation: Chief Executive Officer, NOG, Inc.; Chairman, Ayrshire Precision Engineering.

Previous Positions: Group Vice President, Citation Corporation; Chief Executive Officer, Interstate Forging Industries.
 

 

 

Barbara J. Pope
 Age: 54
Suite 2285
115 South La Salle Street
Chicago, IL
DIRECTOR
Began serving: March 1999

 

Principal Occupation: President, Barbara J. Pope, P.C., (financial consulting firm); President, Sedgwick Street Fund LLC; which is the general partner of a private investment partnership.
 

 

 

OFFICERS

 

 

Name
Age
Address
Positions Held with Corporation

    

Principal Occupation(s) and Previous Positions

John M. Blaser
Age: 45
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
PRESIDENT

 

Principal Occupations: President, Marshall Funds; Vice President, M&I Investment Management Corp., M&I Trust.

Previous Positions: Partner and Chief Financial Officer, Artisan Partners Limited Partnership; formerly, Chief Financial Officer and Principal Administrative and Finance Officer, Artisan Funds, Inc.
 

 

 

John D. Boritzke
Age: 46
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

 

 

 

William A. Frazier
Age: 47
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
VICE PRESIDENT

 

Principal Occupations: Vice President, M&I Investment Management Corp., M&I Trust.

 

 

 

 

Brooke J. Billick
Age: 48
M&I Trust
1000 Water Street
Milwaukee, WI
SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.
Previous Positions: Shareholder, Gibbs, Roper, Loots & Williams, SC.
 

 

 

Lori K. Hoch
Age: 31
M&I Trust
1000 Water Street
Milwaukee, WI
ASSISTANT SECRETARY

 

Principal Occupations: Vice President and Securities Counsel, M&I Trust, M&I Investment Management Corp.

Previous Positions: Associate, Michael, Best & Friedrich LLP; Associate, Quarles & Brady LLP.
 

 

 

Joseph P. Bree
Age: 29
M&I Investment Management Corp.
1000 Water Street
Milwaukee, WI
TREASURER

 

Principal Occupations: Investment Officer and Senior Financial Analyst, M&I Investment Management Corp.

Previous Positions: Associate, Barclays Global Investors; Associate, Strong Capital Management.

 
 

 

 

 

Mutual funds are not bank deposits or obligation, are not guaranteed by any bank, and
are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency. Investment in
mutual funds involves investment risk, including the possible loss of principal.

This report is authorized for distribution to prospective investors only when preceded
or accompanied by the Funds' prospectus, which contains facts concerning each
Fund's objective and policies, management fees, expenses, and other information.

[Logo of Marshall Funds]

Marshall Investor Services
P.O. Box 1348
Milwaukee, Wisconsin 53201-1348
800-236-FUND(3863)
TDD: Speech and Hearing Impaired Services
800-209-3520
www.marshallfunds.com
Edgewood Services, Inc., Distributor G01126-01(10/02)
M&I Investment Management Corp., Investment Adviser
©2002 Marshall Funds, Inc.

321-235Y